Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

Moved by

[Viscount Camrose]

1: Clause 6, page 4, line 3, leave out subsections (2) and (3)
Member's explanatory statement
This amendment would remove the power for the Secretary of State to amend the conditions in subsection (1) by statutory instrument.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

My Lords, I am delighted that we have made it to Report and look forward to today’s debate. Before we get under way, I express my sincere thanks to all noble Lords who took part in Committee and to those with whom I have had the pleasure of discussing a number of issues that have arisen since then. I am extremely grateful for the constructive, collaborative nature of those discussions. It is clear to me that the broad support for this Bill across the House and the desire to see it pass swiftly remain undiminished, which is great to see.

The Government have tabled a number of amendments to improve the clarity and accountability of the regime. I turn first to the amendment to the Henry VIII power in Clause 6. This clause would originally have given the Secretary of State the power to amend by regulations the position of strategic significance conditions in the Bill, to allow them to be updated to account for future changes to digital markets. The Government recognise that Henry VIII powers should be used only where absolutely necessary. I noted the strength of feeling on this issue in Committee and the concerns that the power could be used to introduce broad changes to the framework of the regime. The DPRRC also noted this point in its report on the Bill, for which my noble friend Lord Offord and I were very grateful. Reflecting that strategic significance criteria have been designed to be suitably broad and technology agnostic, we are content to remove this power. Amendment 1 will do that, so I hope that noble Lords will support it.

Amendment 42 ensures that non-commercial organisations acting in a non-commercial capacity will be subject to fines with the same fixed statutory maximum amounts and/or maximum daily amounts as individuals. We expect it to be extremely rare that the CMA would ever need to fine these organisations, but the Bill should provide for all circumstances. These organisations could be subject to financial penalties for investigative breaches—for example, providing false or misleading information to the CMA.

Amendment 40 clarifies that all individuals—including, for example, sole proprietors—will be subject to penalties with fixed statutory maximum amounts and/or maximum daily amounts. Amendment 41 removes a superfluous subsection in the same clause. I hope noble Lords will support these amendments.

Amendment 48 will ensure that private actions relating to the digital markets regime can be transferred between the Competition Appeal Tribunal and the relevant court. This will reflect current practice for competition cases. Effective co-operation and information sharing between regulators is vital to ensuring efficient and coherent interventions under the digital markets regime.

Amendments 160 and 161, under the Wireless Telegraphy Act 2006 and the Postal Services Act 2011 respectively, will allow Ofcom to share information it holds with the CMA where it is necessary for the CMA to discharge its digital markets functions. Ofcom is likely to hold relevant information under these Acts that would be valuable to support work relating to, for example, mobile ecosystems and e-commerce. The amendments will also help prevent unnecessary and duplicative information requests by the CMA. The Government have also put forward Amendments 50, 53 and 159 to improve the Bill’s clarity.

Amendment 58 will ensure that the existing provision in Clause 116—which prevents information the CMA holds as part of an investigation being subject to a disclosure order—cannot be circumvented by instead seeking disclosure from another party that holds the same information.

I hope that, for the reasons I have set out, noble Lords will support the government amendments. I beg to move.

[Lord Faulks (Non-Afl)]

My Lords, Amendments 13 and 35 are in my name and those of the noble Baronesses, Lady Stowell and Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones.

The Bill has been welcomed across the House and it represents a crucial step forward in regulating the digital market. I pay tribute to the level of engagement that has taken place with Ministers and officials. We have had some excellent and well-informed debates in Grand Committee. However, good though this Bill is, it is capable of improvement. I refer to my interests in the register. I am not a competition lawyer, but I do have experience of judicial review and of the operation of the Human Rights Act. I was also chair of the Independent Review of Administrative Law, which reported a few years ago.

My Amendment 13 is concerned with the use in the Bill of the word “proportionate”. Despite some heavy lobbying of the Government by big tech, the right to appeal against an intervention by the CMA will engage the judicial review test, rather than a merits test, except as to penalty. Later amendments will probe the appeal test further.

The original adjective in the Bill was “appropriate”. The word “proportionate” replaced it at a late stage of the Bill’s progress through the Commons. Why? I am afraid I have yet to receive a satisfactory answer. In Grand Committee, the noble Lord, Lord Lansley, referred to a letter from the Minister about the change. However, it did nothing to allay concerns that the change was a response to lobbying by big tech.

According to one view, it is an innocuous change; indeed, one would expect an intervention to be proportionate. The word also has a reasonable legal pedigree: for example, you can defend yourself against attack providing your response is proportionate to the attack. Whether your response is proportionate will be a question of fact, or for a jury to decide.

Judicial review, however, is not primarily concerned with the facts of a decision but with the process whereby the decision is made. Classically, the courts got involved only if a decision was so unreasonable that no reasonable public body could have reached it. The scope of judicial review has expanded to include challenges based on, for example, irrationality or failure to take into account relevant considerations. There are other grounds, but all are concerned with how the decision is reached rather than whether the court agrees with the factual findings.

Since the enactment of the Human Rights Act, the concept of proportionality has entered the law in relation to judicial review, but only in limited circumstances. I will quote the most recent addition of De Smith’s Judicial Review, as I did in Committee, which is generally regarded as the leading textbook in this area:

“Domestic courts are required to review the proportionality of decisions and enactments in two main categories of case: cases involving prima facie infringements of Convention rights and cases involving EU law”.


There are those who think that proportionality should be the test in all cases of judicial review, but that is not the law.

I cannot immediately see why an appeal in the context of the Bill should involve a convention right, but they have a habit of appearing in all sorts of places. If convention rights are engaged, proportionality comes into the analysis anyway. I understand that the Government consider that an appeal may well involve A1P1—Article 1 of the first protocol of the ECHR—which is concerned with the arbitrary inference with property rights.

To speak of human rights in the context of enormous companies such as Google, Apple or Meta is certainly counterintuitive; I do not think that that is what the framers of the European convention had in mind after the Second World War. Last week, Apple was fined €1.8 billion under the European Union’s regulation on market abuse, and there is an appeal. That perhaps gives us an idea of the context of human rights in this area.

If—and this is a big “if”—the courts consider that the convention is engaged, there will be considerations of proportionality. Amendment 35, which I believe is consequential to Amendment 13, raises precisely the same point in a further context. In choosing to put the word “proportionality” into the legislation, a court might well conclude that Parliament had deliberately used the word to widen the scope of judicial review challenge, even when no convention right is engaged. For my part, that is a risk that I do not think should be taken. Your Lordships’ House is well aware of the expensive and time-consuming nature of appeals, which of course favour larger organisations with a large legal spend. The noble Lord, Lord Vaizey, spoke at Second Reading of long and expensive battles and death by lever arch files—although he did not quite put it that way. Large companies have the resources.

A proportionality test is far closer to an appeal on the facts than one based on conventional judicial review principles. The issue as to whether an intervention is proportionate or not gives the court much greater scope for looking at those facts at greater length and greater expense and with a more uncertain outcome. I would therefore much prefer to revert to the word “appropriate”, as was originally in the Bill, which does not carry the same legal charge and does not risk expanding the basis of appeal.

In the Media Bill, criticism has been made of the use of the word “appropriate”, but, as many judges have said before, context is everything, and here it is the right word. I look forward to hearing the Minister’s response and explanation behind the change in wording.

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Finally, I reiterate that, despite our misgivings about the wording of the Bill, we support its central aim and would like to see it on the statute book as soon as practical. However, it can come into effect only once the CMA guidance is produced and signed off by the Secretary of State. We have been concerned throughout this process that there is no deadline for this sign-off to occur. This is why we very much support the amendment in the name of the noble Lord, Lord Lansley, that there should be a 40-day deadline for this approval. We will support him if he wishes to test the opinion of the House on this issue. I look forward to the Minister’s response.

[Viscount Camrose (Con)]

As ever, I start by thanking all noble Lords who spoke so compellingly during what has been a fascinating debate.

Amendments 13 and 35, tabled by the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for conduct requirements and PCIs to be proportionate. I appreciate that this is an issue about which many noble Lords have expressed themselves strongly, and I am grateful for the thoughtful discussions I have had with noble Lords about this, both in Committee and since. I thank my noble friends Lord Black, Lord Wolfson and Lady Stowell for their comments on this today.

We are, as has been observed, giving extensive new powers to the CMA. It is important therefore that we also include safeguards around those new powers. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. That is why we have decided to make the requirement to act proportionately explicit in the Bill. This requirement reinforces the Government’s expectations on the CMA to design conduct requirements and PCIs to place as little burden as possible on firms while still effectively addressing competition issues. The Government’s view is that, for the vast majority of interventions, the DMU would have needed to ensure that they were proportionate even without this explicit provision, as Article 1 of Protocol 1 to the European Convention on Human Rights will apply to interventions that affect property rights of SMS firms, regardless of their size.

The proportionality provisions both make this explicit and ensure that it will apply in all cases, not just those where A1P1 applies, such as when future contracts are affected. The Government have considered case law about the standard of review when proportionality is under consideration by the CAT in competition cases. We do not share the view that the inclusion of these two requirements will raise the standard of review in a way that makes it materially easier for SMS firms to successfully challenge CMA decisions.

As my department has shared with the noble Lord, Lord Faulks, the CAT has held, in BAA v Competition Commission, that it must show particular restraint in second-guessing the CMA’s judgment, and also give a wide margin of appreciation to the CMA. The Supreme Court has also stressed the caution that appellate courts must take before overturning the expert economic judgments of the CMA. We remain of the view that the courts will accord respect to expert judgments of the competition regulator in relation to economic matters and will not seek to overturn DMU judgments lightly.

I hope and believe that all of us, regardless of which Benches we sit on, agree that the UK being a place of proportionate regulation, where it is attractive to start and grow businesses, should be an aim of the Bill. I hope the noble Lord and my noble friend agree and will not press their amendments.

Amendments 43, 44, 46, 52 and 51 from the noble Baroness, Lady Jones, seek to revert the appeals standard of digital markets penalties back to judicial review principles. As I outlined in Committee, the Government believe it is important that the CAT can consider the value of a fine and change it if necessary, as the penalties that the CMA can impose are likely to be significant. Parties should be able to have penalty decisions reviewed to ensure that they are fair and properly applied. Additionally, only the requirement to pay a penalty is automatically suspended on an appeal. Any other remedies put in place by the CMA would remain in place, addressing the competition harm right away. An SMS firm would be expected to comply with them regardless of the outcome of the penalty appeal.

Amendment 45 from my noble friend Lady Stowell seeks to clarify that only penalties, not the decision to impose the competition requirement or the decision that a breach has been made, would be heard on their merits. I appreciate that the intent of this amendment is to improve clarity, but we feel that its drafting does not currently address what I understand my noble friend seeks to achieve. It would currently address only breaches of conduct requirements and not PCIs or enforcement orders. Amendment 55, also from my noble friend—

[Baroness Stowell of Beeston (Con)]

I am grateful to my noble friend for giving way—I hope he will forgive me for interrupting him at a critical moment as he was about to say something about another of my amendments. He said that my Amendment 45 was inadequate because it did not cover sufficient bases. Would the Government consider it as a way forward if they were to expand it in a way that did cover all the bases?

[Viscount Camrose (Con)]

Yes, we very much understand the spirit and intent of the amendment, so I would be very happy to consider that if we could expand it to cover the bases, as my noble friend sets out.

Amendment 55, also from my noble friend, would remove the role of the Secretary of State in approving the CMA’s guidance on the regime and replace it with consultation with certain parliamentary committees. I agree with her that oversight of regulators by both government and Parliament is vital, but the Government have responsibility for the effectiveness of regulators and the policy framework that they operate in. As such, it is appropriate that the Secretary of State approves the guidance under which the CMA will deliver the regime. The CMA must already consult during the production of guidance and parliamentarians can respond to these consultations as they see fit. The Government therefore believe that this amendment is not necessary to permit parliamentary engagement with the drafting of guidance.

My noble friend Lady Stowell’s Amendment 57, also discussed in Committee, requires additional reporting from a number of regulators, including the CMA, on the impact of the digital markets regime on their activities. As each of these regulators already provides annual reporting to Parliament detailing its operations and effectiveness, we feel that additional reporting would be duplicative and create unnecessary administrative burden for regulators. The named regulators also participate in the Digital Regulation Cooperation Forum, which also produces reporting on digital regulatory issues.

Amendment 56 from my noble friend Lord Lansley would add a statutory timeframe to the approval of guidance by the Secretary of State, requiring a response within 40 days. I thank the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and my noble friend Lord Black for their remarks and our conversations on this issue. While the Government agree that it is important that the approval of guidance takes place in a timely manner and are committed to the prompt implementation of the regime, we do not think it is necessary to amend the Bill to achieve this outcome. The Government are committed to the prompt implementation of the regime. The introduction of a deadline for the approval of guidance, while supporting this objective, could cut short productive discussion and reduce its quality.

Amendment 59, tabled by the noble Baroness, Lady Jones, introduces a duty on the CMA to further the interests of citizens as well as consumers when carrying out digital markets functions. I thank the noble Baroness, Lady Kidron, for her remarks on this. As I outlined in Committee, the Government believe that the CMA’s existing statutory duty provides the greatest clarity for the regime, people, businesses and the wider economy. The CMA already manages the interactions between competition in digital markets and wider policy on societal issues under its existing duty and through its work with the Digital Regulation Cooperation Forum.

For example, the CMA’s market study into online platforms and digital advertising considered press sustainability and media plurality among the broader social harms to consumers. The CMA and Ofcom have also published joint advice on how the new regime could govern the relationship between online platforms and news publishers.

The Bill incentivises close co-operation with key digital regulators through the explicit regulatory co-ordination provisions. The CMA will have a duty to consult Ofcom on any proposed interventions that might affect Ofcom’s competition functions for the sectors for which it has responsibility, such as broadcasting and telecoms. It would allow Ofcom to raise wider implications for media plurality.

The CMA has a clear mandate to act for the benefit of consumers in the broadest sense. The meaning of citizens in this context is unclear and risks reducing the clarity of the CMA’s core competition remit and its role in the wider regulatory landscape.

Amendment 49, in the name of the noble and learned Lord, Lord Etherton, would enable private actions relating to breaches of the digital markets regime to be brought on a collective basis. It would also require the Secretary of State to produce a report on other types of claims which might be brought on a collective basis. We commit to reviewing the provision of collective claims in a post-implementation review. It is likely they will play an important role in protecting individuals and incentivising compliance in time.

I agree that, in time, collective actions would also help increase access to redress, recognising the significant legal resources SMS firms will have at their disposal and the costs involved in bringing private actions. However, our view is that making further procedural provision for claims will not bring the best outcomes for consumers and businesses while the regime is bedding in. Consumers and small businesses will benefit most from a public-led enforcement approach.

Under the digital markets regime, the CMA—

[Lord Etherton (CB)]

Does the Minister accept what I said? In the Bill, currently there is no provision under the regulatory regime for the regulator to award damages for losses suffered by individual consumers.

[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?

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[Viscount Camrose (Con)]

I intend for it to be part of the post-implementation review of the Bill.

Under the digital markets regime, the CMA will be devising novel requirements designed to address the particular circumstances of individual firms and market conditions. The DMU will need time to establish a broad set of precedents on the new rules and their enforcement. Introducing collective actions after the regime has bedded in would mirror the approach taken to the wider competition regime, which similarly had limited provision for redress when it was first established. Collective claims would also reduce incentives for firms to engage co-operatively if there is increased concern around litigation.

Amendment 47, in the name of my noble friend Lady Harding, and spoken to by my noble friend Lady Stowell, would prevent relevant courts or the CAT issuing any judgment or remedy that would conflict with a CMA decision. It would also require any private action to be stayed for CMA investigations into the same or similar breaches. The CMA is already permitted to provide evidence and opinions to the courts in competition cases through provisions in the Civil Procedure Rules and the CAT rules. I agree that the CMA may need a greater role in providing evidence and expertise to the courts in cases relating to the digital markets regime.

The Government intend to look at the issue in more detail, as we propose updates to the Civil Procedure Rules and the CAT rules. We will consider whether the courts’ case management powers and other provisions are sufficient to ensure that the CMA can make representations to the courts.

Amendment 1 agreed.

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Moved by

[Viscount Camrose]

2: Clause 11, page 6, line 34, leave out “a statement summarising the contents of”
Member's explanatory statement
This amendment would require the CMA to publish an SMS investigation notice rather than a summary of the notice.

[Viscount Camrose (Con)]

My Lords, the Government fundamentally believe that public transparency is vital for the new digital markets regime. We noted the strength of feeling on this issue from noble Lords in Committee, which is why the Government have tabled amendments to enhance the transparency of the regime. The amendments will require the Digital Markets Unit to publish the full notices relating to SMS designation, conduct requirements and PCIs, so that all interested parties can access them. Amendment 54 makes it explicit that the DMU may make redactions for confidentiality purposes when publishing notices or other documents.

Finally, as a consequence of the other amendments in this group, Amendment 3 will require the DMU to send other regulators a full copy of an SMS investigation notice provided to the firm under investigation, rather than a summary. I hope that noble Lords will support these amendments, which address concerns raised in Committee on the transparency of DMU decisions. I beg to move.

[Lord Bassam of Brighton (Lab)]

My Lords, as the Minister described, this group has government amendments, from Amendment 2 to Amendment 38, which add greater transparency to the process adopted by the CMA in disclosing information about cases involving SMS status firms where the challenger companies have an interest. We are pleased with the Minister’s amendments and, broadly speaking, happy to give them our support, as they respond to points that a number of noble Lords made at earlier stages of the Bill about the need for greater transparency and openness.

The SMS companies are in a position of significant market strength vis-à-vis the challenger firms and have a clear interest in seeing the bigger picture when disclosure is made of information that is of material interest. By obliging the publication of the notices and orders, rather than summaries of the documents, we feel that challenger companies will have greater access to key information that may impact on their market performance. Our amendments, from Amendment 4 to Amendment 39, attempt to achieve a similar result; I suspect that Ministers will argue that their amendments have greater elegance and a similar effect.

I turn to government Amendment 54 and our own Amendment 5. We are clearly of a similar mind and share concerns about commercial confidentiality so that, where reasonable, the redaction of documents can take place. We differ in our approach simply by suggesting that there should be a system for registering the documents that are relevant; the Minister might like to think about that at a later date. In essence, this is an operational issue so, to satisfy our concerns, perhaps he can put on record that there will be an effective system for the registration of documents and a notification process that enables the challenger firms to understand better what information has been disclosed to the CMA in the course of its inquiries. On that basis, we will be content not to move our amendments, and we thank the Government for responding to the concerns behind them.

[Lord Clement-Jones (LD)]

My Lords, this is a very straightforward group, and I congratulate the noble Baroness, Lady Jones, and the noble Lord, Lord Bassam, on having persuaded the Government to move further on the transparency agenda. I like the description given by the noble Lord, Lord Bassam, of the government amendment being more elegant. It is nice to think of amendments being elegant; it is not often that we think in those terms. We very much support the new amendments with some of the caveats that he made.

[Viscount Camrose (Con)]

I thank both noble Lords for speaking so eloquently—indeed, so briefly and elegantly—and the noble Baroness, Lady Jones, for tabling her amendments, which would require the DMU to establish a process for non-SMS firms to register themselves with the DMU as an interested party. The DMU would then be required to send certain notices to these challenger firms.

The Government agree that it is important that affected parties should have access to appropriate information related to DMU investigations. That is why the Government amendments go further, we feel. They will ensure that, subject to confidentiality, the DMU is required to publish all its SMS conduct requirements and PCI notices online, where they are accessible to everyone and not just specific firms that have registered their interest, or those who might not be considered challenger firms. The noble Lord, Lord Bassam, made a point about being informed of these things: while we would prefer not to put any such mechanism in the Bill, it is straightforward to imagine mechanisms that the DMU could employ to automate that.

The CMA has already been updating its approach to identifying and seeking input from third parties, including outside of formal consultations—making calls for evidence when launching investigations, web submission portals, and information requests for businesses, among others It will be able to use these approaches to inform decisions under the new regime.

I agree very much with the spirit of the noble Baroness’s amendments, which is why these government amendments will go further, to promote transparency across the regime. I therefore welcome the statement of the noble Lord, Lord Bassam, that he feels sufficiently reassured to not press the opposition amendments at this time.

Amendment 2 agreed.

Moved by

[Viscount Camrose]

3: Clause 11, page 6, line 35, leave out “statement” and insert “notice”
Member's explanatory statement
This amendment would require the CMA to give a copy of an SMS investigation notice, rather than a summary of the notice, to the FCA, OFCOM, the ICO, the Bank of England and the PRA.

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Moved by

[Viscount Camrose]

6: Clause 12, page 7, line 9, leave out “a statement summarising the contents of”
Member's explanatory statement
This amendment would require the CMA to publish a notice under clause 12(2) rather than a summary of the notice.

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Moved by

[Viscount Camrose]

8: Clause 14, page 7, line 36, leave out “a statement summarising the contents of”
Member's explanatory statement
This amendment would require the CMA to publish an SMS decision notice rather than a summary of the notice.

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Moved by

[Viscount Camrose]

10: Clause 15, page 9, line 5, leave out “a statement summarising the contents of”
Member's explanatory statement
This amendment would require the CMA to publish a revised SMS decision notice rather than a summary of the notice.

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As we have argued throughout, our aim is to avoid unnecessary and expensive legislation. It is our contention that these amendments help to achieve that objective. I will listen keenly and with considerable interest to the Minister’s response, in particular on Amendments 14 and 23.

[Viscount Camrose (Con)]

As ever, I start by thanking all noble Lords who have spoken so well and clearly in this very interesting debate. I will start with Amendment 12 from the noble Lord, Lord Clement-Jones, and Amendments 14 and 15 from the noble Baroness, Lady Jones of Whitchurch, which would expand the ability of the CMA to intervene outside the designated digital activity.

As outlined in Committee, this regime is specifically designed to address competition concerns in digital activities in respect of which firms have been designated as SMS. I agree with noble Lords that the CMA must be able to deal with anti-competitive behaviour outside the designated activity where appropriate, to prevent firms leveraging power unfairly or seeking to circumvent and undermine regulation. Under current drafting, the CMA will already have broad powers to prevent and address issues of an SMS firm seeking to avoid or circumvent the regime or unfairly leverage its market power.

I hope I can reassure the noble Lord, Lord Leong, by listing these. First, there are three types of conduct requirement that can address different types of leveraging. In addition to the leveraging principle in Clause 20(3)(c), the CMA can prevent leveraging by imposing requirements to address self-preferencing under Clause 20(3)(b) and tying and bundling under Clause 20(3)(d). Additionally, PCIs can be imposed anywhere in an SMS firm’s business to address an adverse effect on competition related to a designated activity, such as a firm seeking to circumvent regulation.

Finally, the CMA will have discretion to set the parameters of an SMS designation and to define a digital activity in a broad way. This will limit the risk of harmful activity falling outside the scope of a designation in the first place. This regime has been designed to give the CMA powerful tools to address competition issues. I hope noble Lords feel reassured that, where the CMA should be able to intervene, the powers already in the Bill allow it to do so.

Amendment 60, tabled by the noble Lord, Lord Fox, would require the DMU to consider interoperability and global web standards when carrying out its duty to promote competition under the digital markets regime and to liaise with international authorities when doing so.

The CMA engages already with global digital standards where it is appropriate to do so; for example, with the World Wide Web Consortium, or W3C, the web standards development organisation. We expect that the DMU will also pay due regard to global technical standards, along with other relevant considerations, when operating the digital markets regime. As outlined in Committee, a lack of interoperability in digital markets can reinforce entrenched market positions and harm competition.

SMS designation is the gateway into the regime. The Bill allows the DMU to define digital activity for designation purposes. In defining the digital activity, the DMU will be able to capture the various ways in which the firm provides digital content or internet services as part of that. The DMU would have discretion to impose obligations on that firm, including for interoperability in relation to that digital activity.

The Bill gives the DMU comprehensive and flexible powers relating to interoperability to promote competition in digital markets, including conduct requirements that can be tailored to a firm’s specific business model and behaviour. So I would like to reassure the noble Lord that the regime’s tools can apply to both interoperability between platforms and between and among apps and platforms and other digital services.

Depending on the scope of the designation, the DMU can set conduct requirements under Clause 20(3)(e) to promote interoperability, not only with a platform but in a range of contexts, including web browsers, apps, operating systems and websites.

Other types of conduct requirement can also be used to ensure interoperability, such as requirements for

“trade on fair and reasonable terms”

under Clause 20(2)(a) or requirements to prevent restrictions on the use of other products under Clause 20(3)(h). The Government agree that promoting interoperability and having regard to global standards can be important for promoting competition in digital markets.

Amendments 16 and 17 from my noble friend Lord Lansley would add two additional permitted types of conduct requirement to tackle specific types of behaviour by SMS firms. Amendment 16 seeks to prevent SMS firms charging fees which are unjustified or could restrict access to the relevant digital activity. Under the current framework, the CMA will be able to effectively tackle this issue. The CMA could likely use its powers under Clause 20(2)(a)—the requirement to trade on fair and reasonable terms—and subsections (3)(a), (b), (c) and (d) prohibiting discriminatory treatment, self-preferencing, leveraging, and tying and bundling.

Amendment 17 would add a new permitted type of conduct requirement to deal with SMS firms attempting to stop third parties raising possible non-compliance with the CMA. Again, I can reassure my noble friend that Clause 20(3)(a) permits a conduct requirement that could prohibit an SMS firm imposing discriminatory terms. This could address retaliation by an SMS firm, including where an SMS firm has singled out a user for adverse treatment in retaliation.

I will now address the amendments relating to the countervailing benefits exemption. As set out in Committee,

“the exemption will not act as a loophole for firms to avoid conduct requirements”.—[Official Report, 24/1/24; col. GC 231.]

It is an important safeguard that reflects similar practice in the competition landscape. Under Amendments 25 and 20, my noble friend Lord Lansley proposes to remove the clause and replace it with a discretionary power to consider consumer benefits under Clause 27.

My noble friend is right to say the CMA should be able to consider consumer benefits identified by representations. Regarding the sequencing of these clauses, I reassure him that any representations that the countervailing benefits exemption should apply to would be considered among the representations under Clause 27. Clause 29 does not therefore constitute an additional step; rather, it explains how the CMA must act in relation to a specific type of representation. It would not delay or extend the conduct requirement breach investigation process. Making it discretionary for the CMA to act on a demonstrable instance of consumer benefits outweighing the harm to competition, while removing the criteria in Clause 29, would create uncertainty for both SMS firms and for third parties as to how the CMA will conduct its processes.

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[Lord Lansley (Con)]

I am very grateful to my noble friend. Could he say therefore whether a designated undertaking that feels it can demonstrate countervailing benefits must have presented those to the CMA before the CMA concludes its findings under Clause 30—or can it do so afterwards?

[Viscount Camrose (Con)]

It can make a representation to the effect of countervailing benefits as part of a breach investigation, which can of course happen at any time during the life of a conduct requirement. We would expect it to make those representations at the start of or during the initial investigation. When these representations are made as part of a breach requirement, the Bill sets out the high standards required in order to accept that argument.

[Lord Lansley (Con)]

Sorry, may I just press my noble friend? Can he therefore say that the presentation of a countervailing benefits exemption after the CMA has made findings under Clause 30 would be void?

[Viscount Camrose (Con)]

A representation to the effect that there are countervailing benefits would take place as part of a breach investigation. Of course, once the investigation is complete, there is no further opportunity to do so. Have I answered the question?

[Lord Lansley (Con)]

Yes.

[Viscount Camrose (Con)]

To address the concerns of the noble Lord, Lord Leong, that the current wording deviates from legal precedent, I note that, since this is a new regime, existing exemptions in different competition regimes would not be directly applicable. It is highly likely that the application of the exemption will be tested, no matter the wording.

Finally, Amendment 34, tabled by my noble friend Lord Black of Brentwood, would allow the final offer mechanism to be used after the breach of a conduct requirement, rather than after a breach of an enforcement order. This novel tool has been designed as a backstop to normal enforcement processes. It is a last resort to incentivise sincere negotiations concerning fair and reasonable payment terms between the SMS firm and third parties. I wholeheartedly agree with my noble friend that these incentives must be both compelling and credible. It is clearly preferable for parties to reach a privately agreed settlement rather than one chosen by the regulator. That is why we must ensure due consideration of less interventionist options before turning to the final offer mechanism.

However, if SMS firms try to frustrate the process or drag it out to the detriment of third parties, I agree that the DMU should be able to accelerate stages before the final offer mechanism is invoked. That is why we have ensured that the DMU will be able to set urgent deadlines for compliance with enforcement orders, supported by significant penalties where appropriate, in cases of non-compliance.

I can robustly reassure my noble friend that the CMA can, via conduct requirements and enforcement orders as well as the final offer mechanism, gather and share key information with third parties.

Finally, to his comment on the forced withdrawal of content, the Bill is able where appropriate to tackle this issue. A conduct requirement could, for example, prevent an SMS firm withdrawing a service in a discriminatory way or treating users more favourably if they purchase the SMS firm’s other products.

The Government have worked hard to strike a balanced approach to intervention. This includes ensuring that firms cannot undermine regulation, and prioritising benefits to consumers at the heart of the regime. I believe the tools, as drafted, achieve these goals, so I hope that noble Lords will not press their amendments.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for his response to the various amendments. I will be extremely brief; there will probably be quite a few votes now. I thank him for a full reassurance on Amendment 60, tabled by my noble friend, on standards and interoperability. I was looking closely at the noble Lord, Lord Black, when the Minister talked about Amendment 34, and I think there was a half-reassurance there—so that is one and a half so far.

It is clear to me, having discussed countervailing benefits further on Report, that this is, if anything, more dangerous than it appeared in Committee. I am sure that the noble Baroness, Lady Jones, will have noted the mood of the House as we discussed that.

On leveraging, the Minister made a valiant attempt to go through some points where the CMA might take more into account in terms of non-designated activities and so on. But the Minister sent through the technical note, and I am afraid that, if you look at it with care, it makes quite clear the circumscribed nature of the CMA’s powers under the Bill as currently drafted. It will be very important that we take a view on that. I am sure the noble Baroness, Lady Jones, has been alert to that as well. I withdraw my Amendment 12.

Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, I strongly support Amendment 80 in the name of the noble Baroness, Lady Jones, which I have signed. She spoke powerfully about the power of big tech and its impact on democracy. My concerns, and those of many news organisations such as the Public Interest News Foundation, the News Media Association and the Professional Publishers Association, are consistent with that: we are all concerned to ensure the plurality of media as far as possible, as the noble Baroness, Lady Kidron, mentioned. She also helpfully reminded us of the duty of Ofcom, in Section 3 of the Communications Act, to

“further the interests of citizens”.

It seems to me that the CMA should be subject to exactly the same duty.

Local, specialist and national publishers are an essential part of the fabric of our society. On these Benches, we may have arguments, post Leveson, with some of the mainstream media about the appropriate legislation that should impact on it, but the media play a key role in promoting democracy, by scrutinising the Government with public interest journalism. Additionally, publishers provide vital support to industries, which often rely on the trade press to inform sectoral decision-making and provide what are described as workflow tools. A duty to further the interests of citizens as well as consumers would allow the CMA much better to prioritise media sustainability and more explicitly target anticompetitive conduct that harms media plurality.

It could be argued—I expect that the Minister is going to marshal his arguments—that the current pure consumer focus still allows the CMA to implement solutions that will help to level the playing field between platforms and publishers, but the concern of many of us is that the absence of an interest-of-citizens duty may mean that the remedies that could support a sustainable and plural media and in turn our democracy will be used less effectively than they could be, or not used at all. The argument is powerfully made that we need to include that duty. We have a precedent and there is absolutely no reason why we should not include that in the duties of the CMA.

Turning to the amendment of the noble Lord, Lord Tyrie, Amendment 83A, I feel that this is perhaps something that he expresses throughout the Bill: he has the scars on his back of being the chair of a regulator. It is a surprising omission that these principles are not included. The noble Baroness, Lady Kidron, like the noble Lord, Lord Tyrie, has done her homework and found that the CMA is exceptional in this respect. They both made an extremely good case.

Beyond those principles, how do the Government impose such things as the Better Regulation Framework on the CMA? After all, that is part of the operational standards, if you like, that are expected of a regulator such as the CMA. Not only do I support what the noble Lord, Lord Tyrie, is putting forward, but I also ask how we make sure that the regulator performs its duties in line with what is a relatively new piece of guidance, the Better Regulation Framework, going forward.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

As ever, let me start by thanking the noble Baroness, Lady Jones, and the noble Lord, Lord Tyrie, for drawing attention to and initiating this fascinating debate on the objectives of the digital markets regime with these amendments. Most speakers have anticipated many of my arguments in advance, but I hope none the less to persuade noble Lords of their value.

Clear objectives shape the work of the CMA, ensuring that its focus is on promoting competitive markets that drive better services, greater choice and lower prices for individuals and businesses. It is essential, in the Government’s view, that the objectives of the new regime are equally clear and support a coherent and effective regime. Amendment 80 proposes a duty for the CMA to further the interests of citizens, as well as consumers, in its digital markets work. As the UK’s competition regulator, the CMA’s existing statutory duty is to promote competition for the benefit of consumers. Consumer benefits are broad, as has been observed; they can include economic growth, innovation, media plurality and data privacy. An additional citizens’ duty that goes beyond the scope of the tools and the remit of the digital markets regime would reduce the clarity of the CMA’s role, create inconsistency with the CMA’s wider competition and consumer functions and overlap with the remit of other regulators. It is essential that the duties of the regime match the scope of its tools.

Noble Lords can all agree with the noble Baroness, Lady Kidron, and the noble Lord, Lord Clement-Jones, on the absolute, non-negotiable importance of supporting the sustainability of the press in the UK. There can be no doubt about the vital contribution of independent journalism to producing informed citizens and, therefore, democracy in this country. However, it would further confuse the regulatory landscape to require the CMA to consider issues already overseen by other expert regulators, such as online safety and data protection. Instead, the CMA will have a duty to consult other key regulators of digital markets, such as Ofcom and the FCA, where proposed interventions in digital markets impact their regulatory interests. This will ensure that the regime forms part of a coherent regulatory landscape that considers broader policy and societal concerns across digital markets.

I want to reassure noble Lords that the Government considered the advice of the CMA’s Digital Markets Taskforce and its recommendation for a citizens’ objective extensively, before consulting on it in 2021. Those we consulted were generally opposed to a role for the CMA that looks beyond its tried and tested duty to promote competition for the benefit of consumers, since this provides the greatest clarity for the digital markets regime. The CMA has testified in front of the House that it benefits from having a single, clear statutory duty. I again thank the noble Baroness for her amendment and for highlighting these important issues. However, for the reasons that I have set out, I hope that she will feel reassured and comfortable in withdrawing it.

I now turn to Amendment 83A from the noble Lord, Lord Tyrie. It would create a new requirement for the CMA to have regard to the principles of best regulatory practice when carrying out its digital markets functions under Part 1 of the Bill. Let me say at the outset that the Government agree with the spirit of the noble Lord’s amendment. Our 2021 consultation on this regime set out the Government’s principles for the pro-competition regulation of digital markets: that it should be transparent, accountable, targeted and coherent. These principles have informed how the regime is designed in legislation, from the high thresholds that we establish for SMS designation to the targeted and iterative nature of conduct requirements and pro-competition measures. Indeed, we have discussed previously in Committee the wide range of accountability mechanisms for the regime.

Earlier this month, the CMA set out its provisional approach to implementing the new digital markets regime, which aligns with our policy intent. The publication committed to the new regime being targeted, proportionate and transparent. It also included a set of operating principles that reflect the noble Lord’s concerns.

The Government’s strategic steer to the CMA sets out our expectation that the CMA should take a proportionate approach to interventions and minimise burden through transparent engagement with businesses. The CMA explains how it has taken the steer into account in its reporting to Parliament. The CMA’s prioritisation principles and annual plan set out that the CMA will target its work to that which provides the most impact for business and consumers. The proportionality amendments that the Government introduced at Commons Report stage are statutory duties narrowly targeted at conduct requirements and PCIs as the decisions that have the greatest impact on SMS firms. This amendment would introduce a very broad duty for the CMA to have regard to the principles of regulatory best practice for all its digital markets functions. An explicit requirement for the CMA to follow best regulatory practice when carrying out its digital market functions is not necessary.

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[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?

[Viscount Camrose (Con)]

I will actively seek a counterexample and consider the implications of my results.

The CMA has a strong track record of following best regulatory practice across all its functions as an experienced regulator. The Government’s view is therefore that it makes sense to legislate only when it is necessary to do so, and that here there does not appear to be a problem that requires a legislative solution. For these reasons, I hope the noble Baroness feels able to withdraw her amendment.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have spoken in support of my amendment. I am very grateful. A number of passionate contributions were made. Once again, I was impressed by the knowledge of the noble Lord, Lord Tyrie, and his doggedness in pursuing and getting to the heart of some of these issues. We always appreciate his contributions and the learning we get from them. We have described a couple of his previous contributions as a bit of a curate’s egg, but not this one. I agreed with every word he said and I thank him for that. He made his point extremely well.

Having listened to the noble Lord, it is hard not to agree that the CMA should have the responsibility to have regard to the principles of best regulatory practice. We were just debating why the CMA has to be an outlier, given that other regulators already have this duty. The Minister said that he will try to find a counterexample. The challenge to the Minister is, if he cannot find one among the 500 or so that could be there, will he agree to take this away again and have another look at the Government’s position on this? I was certainly persuaded by the noble Lord, Lord Tyrie, and I think other noble Lords were as well.

I thank the noble Baroness, Lady Kidron, who made a very thoughtful speech. She has been in this field a lot longer than me. As she said, consumers and citizens are two sides of the same coin and, unlike consumers, citizens have a long-term interest. That is the big difference. We need to take that long-term view. She also rightly asked who is defending the interests of future consumers—that is, children. I am not sure that the Minister addressed that issue. I hope that the CMA would have a responsibility to do that. Both she and the noble Lord, Lord Clement-Jones, made the point that Ofcom already has a duty to further the interests of citizens, so I hope that the Minister bears that precedent in mind.

I listened to the Minister and we agree that the CMA needs clear objectives—it has been a theme running through all our earlier debates—but then we get to how to distinguish between the interests of consumers and citizens. In the digital world, in particular, they run into each other. It is not a simple buyer-and-seller market, but a lot more complicated, as a number of noble Lords have said. It is not clear who are consumers, rather than citizens, and what impact the CMA’s decision is having on them. We argue that we need to revisit this issue in the digital world.

I tried to head off the Minister before he spoke about the problem of regulators’ overlap. The fact is that a lot of the business that we are dealing with is not traditionally covered by other regulators, so there is a regulatory gap and it needs to be addressed.

I can see that I have not persuaded the Minister, but I have not given up. I think we are right and that we will probably carry on pursuing the issue but, as I said at the outset, I am not sure I got the wording of my amendment right. We will reflect on what the Minister said and may come back to this later but, meanwhile, I beg leave to withdraw my amendment.

Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Clement-Jones (LD)]

It is very nice and helpful to be reminded of things that I had forgotten entirely. We need to make sure that we are consistent across the board. A full merits-based standard is not, for example, used to appeal against fines issued by Ofcom under the Online Safety Act. These Benches have serious concerns regarding the insertion of two different appeal standards in the Bill, as it may decrease the deterrent effect and risk lengthier appeals, as we have heard.

If we are not successful in persuading the Government to change back to JR for penalty appeals, and a merits appeal is to be included, a number of amendments—the amendment in the name of the noble Baroness, Lady Stowell, that in the name of the noble Lord, Lord Holmes, and my amendment—are of great relevance to make sure that we do not see that drift that the noble Lord, Lord Black, talked about. A failure to do so could run the same risks as an entirely novel appeals standard. On that basis, we very much support the amendments in the names of the noble Lord, Lord Holmes, and the noble Baroness, Lady Stowell, and my own Amendment 68, which would ensure that there is no further extension of the merits appeal standards into any other part of the Bill. It is intended to have the same impact and draw a clear line in the sand beyond which no court can go.

I am sorry that we do not have the noble Lord, Lord Lansley, here to reveal perhaps another letter from a Minister. We had an interesting discussion last Wednesday, when the noble Lord, Lord Lansley, quoted the letter, sent to Damian Collins and Sir Robert Buckland, about the nature of the intention behind including “proportionate”. It said:

“In practice this means that firms will be able to challenge whether the DMU could have achieved its purpose for intervention through less onerous requirements”.


In a sense, that is a massive invitation to litigation, compared to ordinary JR. If that move is an invitation to litigation, think how much further along the road we are travelling if we go for a merits test for the fine and the penalties. I hope the Minister will therefore reverse course back to the pre-Report situation in the Commons; that would give a great deal of satisfaction around this Committee.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I thank the noble Baroness, Lady Jones, for raising the important subject of digital markets appeals through Amendments 64, 65, 67, 71 and 72. I thank noble Lords for their powerful and compelling contributions. I am glad of the opportunity to set out the Government’s position.

These amendments seek to revert the changes made in the other place to the appeal standard of digital markets penalties. This would mean that penalties would be subject to judicial review principles, instead of being heard on their merits. It is important that decisions made by the CMA can be properly reviewed to ensure they are fair, rigorous and based on evidence. As the Bill stands, the key decisions—particularly the regulatory decisions that will drive the benefits from this regime—will be appealable on judicial review principles. Only penalty decisions will be appealable on the merits. This will provide SMS firms subject to penalties with additional reassurance, without compromising the regime’s effectiveness.

Penalty decisions will come at the very end of the regulatory process, if at all. They do not have the same impact on third parties as other decisions in the regime. Conduct requirements and pro-competition interventions will already have been in place to address their intended harm before penalty decisions are considered. Decisions on penalties are different from those about imposing requirements: they are more about making assessments of facts. They will assess what the SMS firm has or has not done. Other decisions that the CMA will take in the regime are forward-looking expert judgment calls. It is appropriate that the latter be given a wider margin of appreciation through a judicial review standard than decisions to impose penalties.

To address the point made by many noble Lords, I make it clear that challenging penalties does not open up the question of whether a breach occurred, or whether a conduct requirement or PCI was right in the first place. I will set this out in more detail in response to the next set of amendments—but perhaps I should say, as I did on the first day of this Committee, that I am happy to listen to and take forward any form of words that strengthens the clarity or intent of the Bill. As I said, the intent of the Bill is that the decision about whether a breach has occurred is made on JR principles.

The digital markets measures, as with other CMA regimes, have always treated penalties differently in the regime. For example, they are automatically suspended upon appeal, unlike other decisions. This would also have been the case under JR. We have aligned penalty appeals with those under the Enterprise Act 2002, as was said, so that parties can challenge these decisions on the merits to ensure that the value of penalties is suitable. The regimes in the Enterprise Act apply to firms from all sectors, rather than just tech firms. In addition, to give two examples, penalties are appealed on the merits in the financial services and markets regime, administered by the Financial Conduct Authority, and, under the Water Industry Act, overseen by Ofwat. In the EU’s Digital Markets Act, penalty appeals are similar to merits reviews in the UK.

--- Later in debate ---

[Lord Vaizey of Didcot (Con)]

I found my noble friend’s remarks very helpful, because they shone a brief light on the Government’s position. Is he saying that, by introducing an on-the-merits appeal for fines, the Government are effectively allowing the CAT to substitute its decision for that of the regulators, whereas if it were a judicial review it would simply have to send back the decision on the quantum or the timing of the fine back to regulator; in which case, he may have a point?

[Viscount Camrose (Con)]

I hope very much that I have a point. I think it would be best for me to write to my noble friend and the members of the Committee to clarify that.

[Lord Faulks (Non-Afl)]

I am listening very carefully to what the Minister says. It would be helpful if he would give an idea of the sort of arguments that would be open to somebody who is challenging a decision as to the fine and the merits. Will they be circumscribed simply by saying, “Well, it was too much”, or will they be able to look in some detail at the whole process and the interventions that ultimately resulted in the fine? How will those two things be kept separate from each other?

[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.

[Baroness Jones of Whitchurch (Lab)]

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

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

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

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

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

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

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

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

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

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[Lord Bassam of Brighton (Lab)]

My Lords, this is the beginning of an important couple of debates about accountability. The breadth and the import of what noble Lords have said so far underlines how much we value that. We on the Labour Benches are co-signatories to both amendments in this group—the first, Amendment 76 in the name of the noble Viscount, Lord Colville, and the second, led by the noble Baroness, Lady Stowell.

Put simply, if the CMA is to be a regulator genuinely independent of government and accountable to Parliament, these amendments should stand. As it is, the legislation seems to suggest that, before the CMA can take any initiative on guidance, it first has to receive the approval of the Secretary of State. This is surely not only a time-consuming process but a wholly inefficient way of conducting business. I can well understand and appreciate why the Government desire to understand how the CMA intends to implement its regulatory policy, but do they really require such a firm and strong hand in the process? As it is, the CMA will be in constant consultation, discussion and interaction with government Ministers, and I do not see why, in the final analysis, approval has to come from the Secretary of State.

Can the Minister tell us how the regulatory regime compares with others? Do regulators like the Charity Commission, Ofcom, Ofwat, the Electoral Commission et cetera all require approval from the Secretary of State before issuing guidance? How does this process contrast with these other regulators? Is there a standard practice, or does it vary across regulatory frameworks? We need something that will work for this particular part of our economy, and it has to be built on trust and understanding and not reliant on the heavy hand of the centre of government coming in and ruling things in or out of guidance which the experts, in the form of the CMA and the DMU, have reflected and consulted on.

We obviously support the amendment of the noble Baroness, Lady Stowell, which, as I said, we co-signed. Consulting the relevant parliamentary committees seems a wholly sensible solution and step. These committees are powerful entities, as we know, full of expertise and insight, and they provide a layer of accountability that Parliament rightly expects. After all, the CMA is a creature of Parliament and of legislation that we will put through this House.

I am sure there are plenty of examples of where legislation, particularly secondary legislation, has benefited from the input and oversight of Select Committees and other committees of both Houses. The points made about lobbying the Secretary of State were important and powerful. We need maximum transparency, and we need openness in this process; otherwise, suspicion will abound, and we will always have cynics who say that Secretaries of State are very much in the pockets of business and commercial interests. We do not want that in this legislation; we want something that works for the market, for the competitive interests in the digital world, and particularly for consumers.

Ministers would do well to listen carefully to what the noble Baroness, Lady Stowell, said. She is an experienced parliamentarian, but, more than that, she was the chair of a regulator, so she understands exactly the import of the pressure that can come from central government and how it can best be managed.

These amendments are important for us in order to secure accountability in this market and in the way in which the various institutions work and operate together. I happily lend my support to both of them.

[Viscount Camrose (Con)]

I start by thanking my noble friends Lord Black, Lady Harding and Lady Stowell, the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and the noble Lords, Lord Clement-Jones and Lord Bassam, for their thoughtful and valuable contributions. I absolutely recognise the seriousness of this part of the debate and look forward to setting out the Government’s position on it. I will address each amendment in turn.

I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell of Beeston for highlighting the subject of accountability to government and Parliament. As I said, I am aware of the importance of the topic, and I welcome the chance to speak to it now. Amendment 76, from the noble Viscount, Lord Colville, would remove the requirement that the Secretary of State must approve guidance produced by the CMA in relation to the digital markets regime. Amendment 77, from my noble friend Lady Stowell of Beeston, would also have this effect. Additionally, Amendment 77 would add a requirement for the CMA to consult certain parliamentary committees about proposed guidance and publish responses to any committee recommendations.

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[Lord Clement-Jones (LD)]

I am sorry to interrupt the Minister, but, if the logic were being followed for what he said, there would be—at the very least—some form of affirmative resolution for the guidance, as with all the other powers in the Bill.

[Viscount Camrose (Con)]

I am happy to look into that as a mechanism, but, as currently set out in the Bill, the logic is that the Secretary of State can approve the guidance.

The Government will continue to work closely with the CMA, as they have throughout the drafting of the Bill, to ensure that the timely publication of guidance is not disrupted by this measure. Published guidance is required for the regime to be active, and the Government are committed to ensuring that this happens as soon as possible. Guidance will be published in good time before the regime goes live, to allow affected stakeholders to prepare. The Government hope that, subject to parliamentary time and receipt of Royal Assent, the regime will be in force for the common commencement date in October this year.

In response to my noble friend Lord Black’s question about guidance and purdah, the essential business of government can continue during purdah. The CMA’s guidance relates to the CMA’s intentions towards the operation of the regime, rather than to a highly political matter. However, the position would need to be confirmed with the propriety and ethics team in the Cabinet Office at the appropriate time, should the situation arise that we were in a pre-election period.

I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell for their amendments, and I hope that this will go some way towards reassuring them that the Government’s role in the production of guidance is proportionate and appropriate. As I said, I recognise the grave seriousness of the powerful arguments being raised, and I look forward to continuing to speak with them.

[Viscount Colville of Culross (CB)]

I thank noble Lords for their contributions and ask the Minister to listen to the concerns Members have expressed today. The clause gives extraordinary power to the Secretary of State, and I ask the Minister to listen to his noble friends, the noble Baronesses, Lady Stowell and Lady Harding, who called the power dangerous. In particular, the noble Baroness, Lady Harding, said that it was so dangerous and such a big power that it must be a distraction.

The noble Lord, Lord Black, said that the concern about having this power is that it would create a delay, and that that would especially be a concern over the period of the election, both before and after. He called for draft guidance to be approved within 31 days, which is certainly something that could be considered; after all, no one wants ping-pong to go back and forth do they? They want the CMA’s guidance to be put into action and this process to start as soon as possible.

The noble Baroness, Lady Kidron, said that the asymmetric power between the regulators and the tech companies means that there will be a drum beat of what she called “participative arrangements”. That is quite a complex thought, but the idea behind it—that the CMA must not be stopped from using its power to deal with some of the most powerful companies in the world—is very important.

The noble Baroness, Lady Stowell, is a former regulator and called for Parliament to have a role in overseeing this. We were reminded by both the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, that we had a discussion on Secretary of State powers in the debate on the Online Safety Act, much of which was about whether a joint digital committee could oversee digital regulation. I suspect that that will be discussed in the next group. We have given enormous powers to Ofcom with the Online Safety Act, we are giving big powers to the CMA and I imagine that we are giving big powers to the ICO in the Data Protection Act, so Parliament should have a powerful standing role in dealing with that.

The Minister called for robust oversight of the CMA and said that it must be accountable before Parliament. Already, Parliament looks at its review and annual reporting. I come back to the concern that the Secretary of State still has powers that are far too great over the implementation of this guidance, and that the CMA’s independence will be impinged on. I repeat what I and other noble Lords said on the concern about Clause 114: it stands to reduce the CMA’s independence. I ask the Minister to consider very seriously what we have been saying.

The Minister’s suggestion that he will look at the affirmative resolution for Secretary of State approval of guidance is something that we should certainly push further—at least that is some step towards reducing Secretary of State powers. With that, I beg leave to withdraw my amendment.

--- Later in debate ---

[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.

[Viscount Camrose (Con)]

My Lords, I shall be as brief as I can possibly be, I promise.

I thank all noble Lords for their brilliant and stimulating contributions. Amendment 79 in the name of the noble Baroness, Lady Jones of Whitchurch, would require the Government to undertake an annual assessment of the operation of the CMA, to include the DMU specifically. The CMA is already required to present and lay its annual report in Parliament. This covers the operation and effectiveness of the CMA, including a review of its performance, governance and finances. The CMA recently published a road map setting out how it will report on the digital markets regime in its annual report. Although I of course appreciate the intent behind the noble Baroness’s amendment, adopting it would run the risk of being duplicative of the CMA’s assessment of its activities, which could lead to concerns regarding its operational independence. The Government set out their priorities for the CMA in their strategic steer and the CMA reports publicly on how it meets these priorities. The Government will also carry out a post-implementation review of the regime to assess how it is delivering on its aims.

Amendment 81 from my noble friend Lady Stowell of Beeston would require additional reporting by the CMA, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom. It would require these regulators to publish annual reports on the impact of the digital markets regime on their activity and its effectiveness in supporting them in regulating digital markets. The Government agree that it is vital that regulators are held to account for their activities. Each of these regulators already produces annual reports that are laid in Parliament covering their operations and effectiveness. An additional report by each of the sector regulators would again run the risk of being duplicative and creating an unnecessary additional administrative burden. Additionally, the Digital Regulation Cooperation Forum was established in 2020 to support the co-ordinated regulation of digital markets and includes the regulators named in this amendment; the DRCF also publishes an annual report on its activities and priorities.

In response to my noble friend Lady Stowell’s important point regarding a committee on digital regulation, I agree with her that parliamentary accountability is crucial and thank her for engaging so clearly with me and my noble friend Lord Offord earlier on this topic. I absolutely recognise the problem. Perhaps I can offer to continue to engage with her on how to drive this forward. At the risk of disappointing the noble Lord, Lord Tyrie, we have a concern that the formation of parliamentary committees is a matter for Parliament, not the Government, but I welcome ongoing work to determine how best to ensure that committee structures can scrutinise the important issue of digital regulation.

Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

My Lords, I thank all today’s speakers for their eloquent, clear and powerful contributions to what has been a fascinating debate of the very highest quality. In particular, a number of speakers referred back to the Online Safety Act debates and variants of the warm glow. I am delighted to participate in any such approach to the Bill, as is my noble friend Lord Offord. I welcome very much the support shown across the House for this legislation, with the caveats gone into by many speakers. As my noble friend said in his opening speech, this is an important Bill which will drive innovation, grow the economy and deliver better outcomes for consumers. The debate we have engaged in is demonstrative of noble Lords’ desire to ensure that digital markets are competitive and work well, and that consumers are protected from the potential harms posed by anti-competitive and unscrupulous practices.

I will respond to the questions raised, cutting across a number of issues and speakers as I go. First, my noble friend Lady Stowell and the noble Lords, Lord Bassam and Lord Clement-Jones, asked, quite rightly, whether we are watering down the Bill. Let me categorically say that that is absolutely not the intention. The amendments at Commons Report brought further clarity, and they will ensure that the DMU’s interventions are proportionate and drive the best possible outcome for consumers. I look forward to discussing this further during the Bill’s passage.

I turn to the appeals standard in the digital markets regime, which was raised by noble Lords across the House, including my noble friends Lord Vaizey, Lord Kamall, Lady Stowell, Lady Harding, Lord Black and Lord Lansley, the noble Lords, Lord Bassam and Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Ritchie and Lady Jones. We have considered strong and differing views about appeals from a range of stakeholders. Judicial review remains the appropriate standard for the majority of decisions in the regime, and we have maintained that for appeals of regulatory decisions, with additional clarification on the need for the Digital Markets Unit to act proportionately. Firms would already have been able to challenge decisions to impose interventions on the basis that there were disproportionate interferences with their rights under the European Convention on Human Rights. This amendment allows that challenge to happen under usual JR principles. Moving appeals on penalties to full merits brings the regime into line with the Enterprise Act 2002. It will mean that, once a breach has been found, a firm could argue that the imposition of a penalty was not appropriate, the level of it was not suitable, or the date by which it should be paid needs to be changed.

I turn to the countervailing benefits exemption, which was raised by a number of noble Lords, including my noble friends Lady Harding, Lord Vaizey, Lord Lansley, Lord Kamall, Lord Black, Lady Stowell, the noble Lords, Lord Bassam, Lord Clement-Jones and Lord Fox, the noble Viscount, Lord Colville, and the noble Baronesses, Lady Ritchie and Lady Kidron—I see the point about themes. I reassure all noble Lords that this is a further safeguard in the legislation to ensure that consumer benefits which might have been unknown when conduct requirements were first introduced can be recognised. The noble Lord, Lord Bassam, asked for an example of how this could work in practice. If an SMS firm bans an application on its platform, it might breach a conduct requirement not to apply discriminatory terms. The firm could claim that the ban was to protect user security and privacy. Thanks to the exemption’s high bar, the DMU would close its investigation only if the SMS firm provided sufficient evidence, such as an independent report from security experts. Firms will not be able to use the exemption to delay enforcement. Assessment of whether the exemption applies will take place during the enforcement investigation, which has a deadline of six months.

The noble Lords, Lord Fox and Lord Bassam, and my noble friends Lord Vaizey, Lady Harding and Lord Kamall asked about the change to the indispensability wording. The change of the language is to clarify the exemption; it maintains the same high threshold and makes sure that consumers get the best outcomes possible, whether through the benefits provided or through more competitive markets.

I thank the noble Lord, Lord Tyrie, for his detailed analysis of the work of the CMA and his continued support for the legislation. He raised the matter of proper scrutiny of the CMA. I very much agree with him on the importance of this and look forward to continuing that conversation.

The noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and my noble friends Lady Stowell and Lord Kamall sought reassurance that requiring the Secretary of State to approve guidance would not cause delays. The Government are committed to ensuring that approval is given in good time, in order for the regime to be in place as soon as possible. Introducing a statutory timeline for this process would limit the Government’s ability to work collaboratively with the CMA.

My noble friend Lord Holmes and the noble Lord, Lord Vaux, raised the importance of the independence of the regulator, and the noble Baroness, Lady Kidron, spoke about the risk of regulatory capture. I agree that this is an absolutely vital issue. The noble Lord, Lord Bassam, and my noble friend Lord Holmes asked about the resourcing and tools of the DMU. I reassure them that the Government have full confidence in the DMU’s resourcing. There are currently around 70 people working in DMU roles, and we expect the DMU to be around 200 people in steady state.

A number of noble Lords, including my noble friend Lord Black, the noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Bennett, Lady Jones and Lady Ritchie, raised the importance of support for the press sector, with which I agree. The digital markets regime aims to address the far-reaching power of the biggest tech firms and help rebalance the relationship between those platforms and other businesses, including publishers. This will make an important contribution to the sustainability of the press, which is so important in all aspects of our lives.

The noble Viscount, Lord Colville, the noble Lord, Lord Fox, my noble friend Lord Black and the noble Baroness, Lady Ritchie, asked about the final offer mechanism and how this will work. The final offer mechanism is a backstop measure to help resolve sustained breaches of conduct requirements relating exclusively to fair and reasonable payment terms, where other DMU tools are unlikely to resolve the breach in a reasonable timeframe. Unlike the Australian and Canadian models, the final offer mechanism is not a standalone tool to force negotiations. It forms just one part of the DMU’s holistic toolkit for promoting competition in digital markets. The DMU will be able to impose conduct requirements on the firm from day one of its designation, including requirements to ensure fair and reasonable terms. However, we recognise that some stakeholders may be concerned about SMS firms frustrating the process. Here, the CMA can seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines on enforcement orders and significant financial penalties, where appropriate.

The noble Lord, Lord Knight, and the noble Baronesses, Lady Bennett, Lady Jones and Lady Uddin, asked if the regulator will have sufficient power to deal with imbalances in access to data. The answer is yes. These are exactly the kinds of issues that the DMU will be able to address.

The noble Viscount, Lord Colville, and the noble Baroness, Lady Uddin, asked how the digital markets regime will address the rise of artificial intelligence. The regime has been designed to be tech-neutral, future-proof and flexible enough to adapt to changing digital markets.

I now turn to questions raised today on the competition part of the Bill. I note the interest from my noble friend Lord Sandhurst in the recent Supreme Court judgment on the status of litigation funding agreements—LFAs—and its potential impact on the ability to bring collective actions on behalf of consumers across the legal system. The Government have urgently addressed the potential implications of the judgment on claims under competition law, and we feel this has provided some much-needed certainty to funders and claimants. I also note the interest from my noble friend and others across the House in extending this to all parts of the civil legal system. While I am advised that this Bill is not the appropriate vehicle to deliver this aim, I can assure noble Lords that the Ministry of Justice is actively considering options for a wider response.

I now turn to the consumer part of the Bill. Several noble Lords, including my noble friend Lord Black, the noble Lords, Lord Vaux, Lord Clement-Jones and Lord Bassam, and the noble Baroness, Lady Jones, posed questions about the approach taken in the Bill on subscription traps. The measures being taken forward are the ones which are necessary and proportionate to ensure that consumers are treated fairly and understand what they are signing up to, while balancing further costs and regulatory burdens on businesses.

A number of noble Lords—I hope noble Lords will forgive me if I do not read out the full list, because there are far too many of them and it might test everyone’s patience—raised concerns about potential unintended consequences for charities in relation to the new subscription rules, in particular their ability to claim gift aid. Donations to charities where nothing is received in return are not subject to the subscription rules. Generally, charities will only be in scope if they provide auto-renewing contracts to consumers for products and services in return for payment. This is consistent with other consumer protection laws. I reassure the House that it is not the Bill’s intention to undermine access to gift aid; we are examining this issue closely and will provide a further update in Committee.

Many noble Lords, including the noble Lords, Lord Bassam and Lord Fox, raised other consumer harms such as drip pricing and fake reviews. The Government have recently consulted on proposals to address these and other practices, and our upcoming consultation response will set out next steps. The noble Baroness, Lady Bennett, also mentioned misleading green claims. This is indeed an important issue, which we hope is already covered by existing regulations.

I agree with the noble Baroness, Lady Hayman, and my noble friend Lord Holmes that the right to repair is important. The right-to-repair regulations which came into force on 1 July 2021 address some of the issues she raised. My noble friend Lord Offord, as the responsible Minister, would be happy to meet her to discuss this further.

My noble friend Lord Holmes raised concerns about Henry VIII powers. Where the powers to amend primary legislation would permit major changes to the legislation concerned, they are subject to the draft affirmative procedure.

I hope that in wrapping up I have responded to at least most of the points raised by noble Lords today. I note that there were other issues raised which I have not addressed, such as alternative dispute resolution and secondary ticketing. I look forward to discussing those items and others during the Bill’s passage. Let me once again thank all noble Lords for their contributions and engagement, not just today but in the lead-up to it. My noble friend Lord Offord and I look forward to further and more detailed debates on these matters and many more besides in Committee.

[Lord Fox (LD)]

Before the Minister sits down, I should say that I mentioned the central role that standards and the setting of future standards have. The Minister need not answer the question now, but could he write to me about the strategy, in a sense, and the involvement that the DMU might have, or should have, in future standards-setting for the technology?

[Viscount Camrose (Con)]

I apologise to the noble Lord for not addressing that. Absolutely I will write.

Bill read a second time.