Online Filter Bubbles: Misinformation and Disinformation

Alex Davies-Jones Excerpts

Tuesday 16th January 2024 Westminster Hall

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

It is most unusual for me to called so early in a Westminster Hall debate, Sir Mark, so I am grateful to you.

I congratulate the hon. Member for Weston-super-Mare (John Penrose) on securing this debate. There is no question that preventing misinformation and disinformation is one of the great challenges of our time, and it will only become more and more challenging, as he has adumbrated in his remarks to the House this afternoon.

Unfortunately, we have many active theatres of conflict around the world at the moment, so I will begin by thanking all of those who take to social media to counter so much of the disinformation that exists. Whether it is about the war in Ukraine or about the situation in the Red Sea, Gaza and Israel, so much disinformation is doing the rounds. Some of it is clearly state-sponsored; some of it less so.

Indeed, there is also misinformation or disinformation about elections, so no doubt we will see more of that as the elections in this country and elsewhere in the west draw closer. Also, last week there were elections in Taiwan, when the Taiwanese political parties said it was the harshest election yet in terms of Chinese-sponsored disinformation against a democratic people. However, a great many people invest time, effort, energy, money and resources online to counter such disinformation and they do a public service.

I will mention the negative part first, if I may; there is no point in my going over all the various examples of disinformation that exist. I recall being in a conference a few years ago with the hon. Member for Folkestone and Hythe (Damian Collins) where one of the complaints that we had—it is so often a complaint—was that when there are conferences and workshops and think-tank events about disinformation, everybody wants to talk about examples of disinformation but few people want to talk about how we arm ourselves against it.

So, as I say, let me start with the negative part first. I do not mean any of what I say today to be against the Minister—the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Meriden (Saqib Bhatti)—who, I will confess, I do not think I have faced on this issue before. Nevertheless, the Government do not have a coherent strategy on this issue. There are a great many officials across Government and across Whitehall who are doing some sterling work on it; no question about that. At a political level, however, this issue has not been given the serious consideration that it deserves; although it may be uncharitable of me to say so, that was evidenced most of all by the fact that Nadine Dorries was put in charge of it. [Laughter.] Having said that, I will come on to a central problem that is less about personalities and more about the policy framework and the institutions that are required.

As I understand it, and the Minister may correct me in his remarks, misinformation is the responsibility of the Department of Culture, Media and Sport; some disinformation is also that Department’s responsibility. Foreign disinformation falls with a mixture of the Foreign Office, the intelligence services and the Home Office. Other parts of disinformation are the responsibility of the Ministry of Defence and defence intelligence. I spent five and a half years as my party’s spokesperson for defence and the type of question that I wanted to ask depended on whether or not the Ministry of Defence could answer it. Who does this madness—a madness of responsibility and lines of accountability lying all over Whitehall—benefit? Certainly not our constituents.

[Alex Davies-Jones (Pontypridd) (Lab)]

The hon. Member is making a very important point. I have tried repeatedly to find answers from the Government’s Counter Disinformation Unit. That specialist unit, set up in Whitehall to counteract some of this disinformation, is meant to be cross-departmental, but sadly it has been quite dormant. We have had very little information and transparency. Does the hon. Member agree that, if we had more transparency, we could see what Departments were working on across Government and seek to tackle the problem?

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[Alex Davies-Jones (Pontypridd) (Lab)]

It is a pleasure to speak in this debate under your chairship today, Sir Mark. I thank the hon. Member for Weston-super-Mare (John Penrose) for securing this timely and important debate on such an important issue.

Let us be clear that the Online Safety Act is an extremely important and very long-overdue piece of legislation. In reality, however, gaps remain in that legislation that need to be addressed. In this debate, we have heard about what are hopefully some positive ways forward.

There is huge cross-party consensus. It is a shame and a frustration that, when cross-party amendments were tabled to the Online Safety Bill, they were not taken seriously enough in Committee and were not carried forward. We raised serious questions about social media platforms, their responsibility to protect users, young and old, and to tackle the rise in disinformation. That was a clear opportunity that has now sadly passed, but the fact remains that this issue needs to be tackled.

This debate is timely, but when the Bill was progressing through Parliament, the debate focused on misleading information around the conflict in Ukraine. We all know that an alarming amount of information has recently been shared online regarding the situation in Israel and the middle east. As the hon. Member for Brigg and Goole (Andrew Percy) mentioned, the horrendous atrocities that occurred on 7 October were livestreamed by Hamas. They wore GoPros and uploaded the footage directly to social media platforms, yet an incredible number of people still did not believe it, saying it was not true or that it was a hoax. How far do we have to go for women in particular to be believed when they report crimes against them and to take this seriously? I cannot help but think that if the Government had listened to the concerns that I and others raised at that time, then we would be in a much better position to deal with these issues. Sadly, we are where we are.

As colleagues have mentioned, we also need to consider the role that AI plays in relation to misinformation and disinformation, particularly the impact of generative AI. That has the power and the potential to be at the forefront of economic growth in the country but, as others have mentioned, with a huge number of elections happening across the world this year, there has never been a more crucial time to tackle the spread of this misinformation and disinformation and the impact that it could have on our democracy. I would be grateful if the Minister reassured us that the Government have a plan; I would welcome his assurances, specifically in light of whatever discussions he has had with the Electoral Commission regarding plans to tackle this ahead of the next UK general election.

The Minister knows that, despite the passing of the Online Safety Act, many of the provisions in the legislation will not be in place for quite some time. In the meantime, Twitter—now X—has given the green light for Donald Trump’s return. Political misinformation has increased since Twitter became X, and right-wing extremists continue to gain political traction on controversial YouTube accounts and on so-called free speech platform Rumble. Platforms to facilitate the increase in political misinformation and extremist hate are sadly readily available and can be all-encompassing. As colleagues have rightly noted, that is nothing new. We only need to cast our minds back to 2020 to remember the disturbing level of fake news and misinformation that was circulating on social media regarding the covid pandemic. From anti-vaxxers to covid conspiracists, the pandemic brought that issue to the forefront of our attention. Only today, it was announced in the media that the UK is in the grip of a sudden spike in measles. Health officials have had to declare the outbreak a national incident, and the surge has been directly linked to a decline in vaccine uptake as a result of a rise in health disinformation from anti-vax conspiracy theories. That causes real-world harm and it needs to be addressed.

Misinformation causes anxiety and fear among many people, and I fear that the provisions in the Act would not go far enough if we faced circumstances similar to the pandemic. We all know that this is wide-ranging, from conspiracy theories about the safety of 5G to nonsense information about the so-called dangers of 15-minute cities, about which my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) spoke so ably. Sadly, those conspiracy theories were not just peddled by lone-wolf actors on social media; they were promoted by parliamentarians. We have to take that issue very seriously.

There are dangerous algorithms that seem to feed off popular misinformation and create these echo chambers and filter bubbles online. They have not helped but have amplified the situation. Would the Minister explain why the Government have decided to pursue an Online Safety Act that has failed to consider platforms’ business models and has instead become entirely focused on regulating content?

Moving on, possibly my biggest concern about misinformation and disinformation is the relationship between what is acceptable online and what is acceptable offline. As we all know, the issue of misinformation and disinformation is closely connected to online extremism. Although the Minister may claim that people can avoid harm online simply by choosing not to view content, that is just not realistic. After all, there is sadly no way to avoid abuse and harassment offline if individuals choose to spout it. In fact, only recently, when I dared to raise concerns and make comments here in Parliament about online misogyny and incel culture and ideology, I experienced a significant level of hate and harassment. Other colleagues have had similar experiences, as we have heard today.

This is a worrying trend, because we all know that online extremism can translate into the radicalisation of people in real-life terms, which can then heighten community tensions and make minority groups more susceptible to verbal and physical abuse and discrimination.

Online harm costs the UK economy £1.5 billion a year; we cannot afford to get this wrong. Online harm not only has that real-world impact, but it puts our country at an economic disadvantage. Recent research has shown that when there is a spike in online abuse towards one specific demographic, that translates to real-world abuse and real-world harm two weeks later, as the police themselves have said. There is only a two-week lag before online harm results in real-world attacks on certain individuals. No one should have to fear for their safety, online or offline.

In short, the Online Safety Act 2023 had the potential to be as world-leading as it was once billed to be, but the Minister must know that is far from being a perfect piece of legislation, particularly when it comes to misinformation and disinformation.

I am clearly not alone in expressing these views. I hope that the Minister has heard the concerns expressed in this wide-ranging debate, and that he will take seriously some of the proposals and move them forward.

[Sir Mark Hendrick (in the Chair)]

We now move to the contributions from the Front Benches.

Digital Markets, Competition and Consumers Bill

Alex Davies-Jones Excerpts

Report stage
Monday 20th November 2023 Commons Chamber

[Alex Davies-Jones (Pontypridd) (Lab)]

It is a true privilege to be back in the Chamber once again, on behalf of the Opposition, to open the third debate in recent months on Report stage of this incredibly important Bill. I welcome the Minister to his place: he is joining this brief at a very exciting time, and I look forward to working with him in the months ahead to get the Bill finally over the line. I pay tribute to his predecessor, the hon. Member for Sutton and Cheam (Paul Scully). We may not always have agreed on the detail, but I was always grateful for his collegiate and open-minded approach to getting the Bill to a good place, where it needed to be.

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[Margaret Greenwood (Wirral West) (Lab)]

People often find it difficult to get out of internet provider contracts. They may spend hours on the phone, or communicating via a bot, and when they do get through to someone, that person tries to talk them out of what they are trying to do. It seems to me that it would be very straightforward to require providers to have on their websites a simple and prominent “cancel my contract” button, easily visible to anyone who is logged in. That, surely, would save people acres of time and a huge amount of frustration.

[Alex Davies-Jones]

My hon. Friend has made an important point about an issue faced by all our constituents who are struggling to get out of contracts that do not give value for money, and subscription traps, which we will discuss later this evening. These are issues that should have been dealt with in the Bill, and could have been had it been afforded parliamentary priority. Sadly, many opportunities have been missed and will need to be returned to, and we will be urging the Government to do that in due course.

The Conservatives have needlessly delayed the introduction of the Bill. Their focus on infighting and general chaos has prevented them from presenting suitable legislation. The Bill was first promised in Parliament more than a year ago, and since then, owing to Tory delay, we have fallen behind our European neighbours in this vital policy area. Failure to act against gatekeepers to access points in the digital economy—from web browsers to search engines, and from mobile operating systems to app stores and broadband contracts—is having a huge impact on business growth and consumer prices. Let us be clear: a failure to regulate and level the playing field is having a huge impact on consumers, who ultimately pay the price.

This is a complicated Bill, which has rightly received substantial coverage in the media since it was first published. It is only appropriate for me to begin my consideration of the first group of amendments by raising particular concerns about the Government amendments relating to the countervailing benefits exemption—notably, amendments 13 and 14. As we all know, the countervailing benefits exemption allows the Competition and Markets Authority to close an investigation of a breach of a conduct requirement if a big tech firm can demonstrate that its anti-competitive conduct produces benefits that outweigh the harm. These amendments change the test for the exemption from indispensability—a recognised competition law standard that ensures that a big tech firm cannot proceed with anti-competitive conduct without good reason—to an untested, potentially ambiguous standard. There is a danger that this new, untested standard could allow big tech firms to evade compliance and continue with conduct that harms UK businesses and consumers. They might also inundate the CMA with an excessive number of claims of consumer benefit, diverting its limited resources away from other essential tasks.

The Minister must be realistic. It is highly unlikely that anti-competitive conduct on the part of regulated firms will ever have a consumer benefit. The amendment creates an unnecessary loophole that Labour colleagues and I find very concerning. I would also be grateful if the Minister could clarify whether these amendments create a new legal standard that could allow regulated companies to evade compliance. There is also the question of how the amendments will protect the CMA from being inundated with claims of countervailing benefits from regulated companies. Labour is concerned by these amendments, and I therefore urge Members across the House to support amendments 187 and 188, tabled in my name, which seek to undo the Government’s mismanagement.

I will turn now to the changes in the appeals mechanism. The Minister knows about, and will have heard, the concerns of colleagues on the Conservative side—on all sides, actually—about the changes in the appeals process, as outlined in Government amendment 51 to 56. We have all heard the passionate calls from businesses that have risked their reputations and market share by sticking their heads above the parapet to warn of the risks of watering down the appeals process. It is testament to their hard work that we are at this point today.

As colleagues will be aware, the Government amendments would change the appeals process and standard for penalty decisions to full merits only. As we know, penalties such as fines are the most significant deterrent to prevent short message service firms from breaking the conduct requirements established by the CMA. Although timing—a key concern when considering the impact of full merits on other parts of the Bill—is not of paramount importance when it comes to fines, it is foreseeable that full merits appeals could allow SMS firms to reduce significantly the size of penalties, thus reducing their incentive to comply.

The Minister will come to learn that collegiate, sensible agreement has been a common theme as the Bill has progressed, particularly in line-by-line scrutiny in Committee. Indeed, we broadly welcome the Government’s decision to maintain the judicial review standard for appeals on regulatory decisions. Labour feels that will ensure that the Competition and Markets Authority has the tools to act and is not bogged down in complex, lengthy and costly legal wrangling, which would render the new regime completely ineffective.

However, the Minister must clarify how the amendments will not impede the CMA’s ability to keep pace with rapidly moving digital markets. The regulator must retain the flexibility to construct remedies that target the harms to UK businesses and consumers stemming from big tech’s dominant position in digital markets. Looking back on the contributions of the Minister’s predecessor in Committee, we were all assured with a level of certainty that there would be no changes to weaken the appeals process, so it is a frustrating reality to see yet another U-turn from this Government—sadly, we have all become more than used to their slapdash way of governing and making law.

As we know, introducing full merits appeals for all regulatory decisions would have allowed complex, lengthy and costly legal wrangling, which would render the new regime ineffective. It must therefore be clarified that the Government’s amendment allows full merits appeals only for the level of the fine and for the decision to issue a fine. It must not permit a review of the CMA’s decision to create a conduct requirement or implement pro-competitive intervention, or of the CMA’s decision on whether a conduct requirement has been breached and how to remedy that breach. I would therefore be grateful if the Minister clarified exactly whether that will be the case.

I am conscious of time so I will push the Minister to clarify a number of important points. Government amendment 64 gives the Secretary of State the power to approve CMA guidance, which will be critical to regulated firms, particularly on how they should comply with the conduct requirements placed upon them. What is unclear is when and how, and in what timeframe, guidance must be submitted to the Secretary of State. I know that many of us would be grateful for some straightforward clarity from the Minister on that issue.

Lastly, I am keen to highlight Labour amendments 194 to 196, tabled in my name, which aim to improve the consultation rights of challenger firms. Under the current drafting, firms with strategic market status will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. The amendments would give third parties the ability to provide critical information for the CMA’s consideration, and feedback on its work. That is vital, particularly for challenger companies whose growth may see them captured by the regime at a future point. I hope that the Minister will consider the merits of introducing similar amendments in the other place. He would have widespread support from colleagues across the House if he were to go ahead and do so.

We have heard the concerns of Members across the House about how the changes have been implemented, so I urge the Minister to listen carefully to the debate as it progresses and to do the right thing by working collegiately for the benefit of good legislation.

[Sir Robert Buckland (South Swindon) (Con)]

In rising to address the House, I draw Members’ attention to my entry in the Register of Members’ Financial Interests: I am an independent adviser in a collective action being brought in the Competition Appeal Tribunal for alleged anti-competitive behaviour relating to cryptocurrency. Although I will not address my remarks to any part of the Bill that might be perceived as relevant to the funding of litigation relating to such actions, I thought it right to be comprehensive in my declaration.

I wish to couch my remarks in this way: I am a firm supporter of the need to provide effective regulation in a market that is vulnerable—and, some would say, prone—to monopolistic abuse of market power. It is clear that regulation is not only desirable but essential when it comes to representing the interests of the consumer, and that is the place from which we all need to start.

In the sturm und drang that has accompanied some of the coverage of the Bill, it is perhaps inevitable that focus has been placed on the interests of one sector, as opposed to those of another—the large-scale enterprise against the small start-up. In all that, we risk forgetting the essential truth of why we are legislating in this way, which is first and foremost to ensure that any regulator is working in the interests of the consumer. My amendment deals precisely with that issue, by imposing an overarching and paramount duty on the regulator, and indeed the courts, to serve the interests of the consumer. Accompanied with a duty of expedition, that underlines the thrust of why I have decided to speak in this debate and to table amendments. Much needs to be done in the process of dealing with competition issues, which of course means the operation of the CMA and the Competition Appeal Tribunal. This debate—indeed, this whole process—can be a moment for us to reflect, and to take action and ensure that the way such disputes are dealt with in future will be more efficient, more speedy and in the interests of the consumer.

Ex-ante regulation is very difficult; it is all about predicting the future. Indeed, I am glad to see my hon. Friend the Member for Folkestone and Hythe (Damian Collins) in the Chamber. He followed that market very carefully and knows its ever-changing nature. It is difficult to predict what the world will look like in six months, let alone in five years. It is right to remember that the basis of the Bill, and of today’s debate, goes back four years to the Furman review, which rightly set out the parameters that have led to the development of this much-needed legislation.

In one respect, the review has been somewhat prayed in aid in a way that is potentially misleading. Recommended action 12 of the Furman review speaks about the ability of an affected company to appeal a decision—this is relevant to amendment 185 to clause 102. The review states:

“To facilitate greater and quicker use of interim measures to protect rivals against significant harm, the CMA’s processes should be streamlined.

The ability for an affected company to appeal a decision or an interim measure is a vital safeguard of their rights, and a check on the quality of CMA decision-making. Appeals processes need to strike a balance between protecting those affected by any unjustified decision and ensuring that CMA powers can be exercised effectively to protect those who would be left exposed by underenforcement or undue delay.”

It goes on:

“The competition framework would be improved for digital markets by focusing appeals on testing the reasonableness of CMA judgement, that procedure has been appropriately followed, and that decisions are not based on material errors of fact or law—a standard more closely relating to that of judicial review.”

As I read it, that is an invitation to ensure that there is not a completely unbridled merits-based approach. It is a world away from suggesting that somehow, in this world of ex-ante regulation, we should be immediately narrowing down the options of any court or applicant relating to potential claims on merit.

Ex-ante review work is not easy, but it is not unprecedented in United Kingdom regulation. We have had telecoms regulations for a long time, with the work of Ofcom in policing that. In that area, for a long time the decision making and the appeals process were allowed to be based on merit, before a reversion or a narrowing down to judicial review principles. Indeed, that was laid out for a long time—much longer than the period I envisage in my amendment—in order to reflect the importance of achieving maximum clarity as early as possible. I do not want to see anything that creates uncertainty in this market, because that will lead to a lack of investment, and perhaps a reduction of the sorts of investments that we want to see domestically and internationally in this important and vital market for the future of our British digital services industry.

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Finally, some technical amendments to the general provisions apply across the Bill, dealing with matters such as commencement. I want to ensure that there is plenty of time for Members to debate the Bill at this important stage, and I appreciate the constructive and collaborative approach that colleagues have so far taken during the passage of the Bill.

[Alex Davies-Jones]

First, let me say how pleased I am to see the Minister remain in post, and I thank him for his collaboration during the passage of the Bill; it has been appreciated by those on the Labour Front Bench.

I am keen to highlight a number of amendments tabled in my name that, sadly, have been significant Government omissions. New clauses 29 and 30 relate to subscription traps, which frustratingly still remain in the Bill. I have heard from the Minister and I am grateful for his approach, but Labour has pledged to end subscription traps, which see consumers get stuck in auto-renewing contracts that they did not explicitly ask for following free trials, by making companies end automatic renewal as a default option. The plans would change the current system of “opt out” to ensure that customers actively “opt in”, saving people money during this Tory Government’s cost of living crisis.

In the last year alone, people in the UK spent half a billion pounds on subscriptions that auto-renewed without them realising, and unused subscriptions are costing people more than £306 million per year. That is impacting marginalised groups and those on low incomes considerably more than others. It could mean that those least able to absorb the cost of being in a subscription trap are more likely to be in one, and the impact on those people will be more acute. Although the Government have recently made changes so that companies will be mandated to provide a reminder to consumers before renewing their subscription, sadly that change does not go far enough. I urge colleagues to support these new clauses, because this issue is impacting people in each of our constituencies the length and breadth of our islands.

In addition, amendment 225 would address the common issue of drip pricing, which impacts people across the UK. As colleagues will be aware, drip pricing is the practice of businesses advertising only part of the product’s price, and then later revealing other obligatory charges as the customer goes through the buying process. The Government promised to tackle that issue in the King’s Speech, but they have not tabled their own amendments on it. Indeed, the King’s Speech was the fourth time that this Government have promised to act since 2016, and enough is enough. Can the Minister clarify exactly why the Government have chosen to ignore the opportunity to right this wrong in the legislation?

Broadly, the Bill is welcomed by the Opposition, but it is well overdue. It is a positive step forward in creating new competition in digital markets that will enable the competition authorities to work closely and fairly with businesses to ensure fair competition and to promote growth and innovation. Labour in particular welcomes competition and consumer choice and protection as signs of a healthy, functioning market economy. It is vital, if we are to make the UK the best place in the world to start and grow a business, that digital opportunities are open for all. We are committed to ensuring that a pro-business, pro-worker, pro-society agenda is built for Britain, and we see consumer protections and competition law as playing an integral part in that. I look forward to the Minister’s response, and I look forward to seeing this Bill finally progress to becoming an Act.

[John Penrose]

May I start where I left off when the Bill hit Second Reading by saying that it is extremely welcome and creates an enormous amount of important and much-needed change? I continue to support it in principle.

My purpose in rising today is to speak to new clause 31, which I have tabled and 29 parliamentary colleagues have supported. Those who are familiar with the Kremlinology of the Conservative parliamentary party will understand that the new clause does something wondrous to behold, which is that it unites the breadth and every single part of the party behind one central idea: better regulation. I should pause briefly just to say that better regulation is distinct from deregulation. Better regulation is not saying that we want to trash standards; it is saying that standards of everything from environmental standards to workers’ rights all matter, but it does also matter that Governments of any type and stripe make sure they try to deliver those standards in the cheapest and most efficient and economically logical way possible. That is the difference between deregulation and better regulation. It is about delivering high standards, but in the most economically sensible way. That is what new clause 31 attempts to do.

It is worth pointing out that we had a regime that worked pretty well for about five or six years between 2010 and 2016, and it did something along those lines. It was called “one in, one out,” and then it was upgraded to “one in, two out.” It basically said that any new piece of legislation or regulation had to be costed for the extra cost it was adding on to the British economy, and before it could be introduced the Minister concerned had to find an equally large amount of cost to remove from other regulations elsewhere to begin with. Later, it was twice as much cost to remove from other regulations elsewhere. That worked reasonably well, except that it had some loopholes deliberately left, partly because it could not affect anything created in Brussels when we were members of the EU, and also because it did not cover things such as the economic regulators, Ofgem and Ofwat and so on.

That system changed to what everyone hoped would be a better one in 2016, but it turned out to be an absolute disaster. Instead of gently but steadily bearing down on the costs of regulation, we saw a huge ballooning in costs in the first year of the new system, and there was a target of reducing the costs of regulation across the economy by £8 billion or £9 billion. Instead of that, they increased by that amount. One would have thought that would have meant that the sky fell in, everyone would have been horrified by that notion and this place would have been up in arms, but not a bit of it. There was zero reaction from any party across the House, because the system was lacking some crucial points. The crucial thing it was missing was a proper accountability mechanism for when Governments of any kind fail to deliver on better regulation principles and on reducing the cost to wealth creation in this country, and inherently therefore reducing the rate of growth in the country and the improvements in productivity that we all want to see. It meant nothing happened within Parliament.

Clearly, we cannot leave things as they stand, and new clause 31 is an attempt to try to put that right. It would do something very simple, and it comes back to what I have called net zero red tape, which is effectively one in, one out, with the cost of any new pieces of legislation or regulation needing to be matched by finding countervailing savings elsewhere, but it would also do something else. The new clause says, “We need to make sure that there is not just a commitment from Ministers, but a legal duty on Governments—not just this Government, but all future Governments—to make sure that everyone who is a Minister, when they get out of bed on a Monday morning, knows they have a legal duty to deliver on this.” That would mean that if Ministers did not deliver on it, they will have broken the law. Breaking the law means they are in breach of the ministerial code, which this Parliament and all Parliaments take seriously. It would be a far more effective trigger mechanism for ensuring proper accountability and that this measure is delivered.

I would be the first to admit that this new clause is not perfect. That is because the parliamentary Clerks have rightly said, “Hang on a second; this Bill has a scope, and you cannot exceed it.” Therefore the new clause cannot, even though I devoutly wish that it could, apply the basic principles that I have just been explaining to the House across the entire economy—would that it could. As it is, it can only apply those principles to the economic regulators and anything to do with competition and consumer law. That is a huge step forward, because, as I mentioned, the previous regimes all excluded the activities of economic regulators, and we will now enfranchise them, if we agree this new clause. That is worth doing, but the new clause is far from perfect, because it cannot cover the rest of the economy.

Incidentally, the relevant bits of accountancy—the reporting on whether costs have been added or subtracted —has to devolve to the Competition and Markets Authority under the scope of the Bill, when in fact a perfectly respectable initial grouping, the Regulatory Policy Committee, already does it. It is full of clever and well-intentioned people, and I think the CMA would rather it did not have to do this work if it could avoid it; it would rather that others did it.

It is not a perfect amendment, but it none the less would take us a big step in a much-needed direction and establish an important principle. I am grateful to the Minister, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who mentioned that we have been having extensive discussions over the weekend in an attempt to lock in these fundamental underlying principles and to find ways to perhaps broaden them beyond just the scope of this Bill. I hope that in his closing remarks he will be able to come up with some comments that may allow me not to press this amendment to a vote.

Fundamentally, the crucial things we have to ensure are: proper independent measurement, reporting and accountability on the costs of new regulations, rather than anything that can be lent on by Government; proper consequences for Ministers in any Government who fail to deliver on trying to reduce those costs; and that no Government feel like they have a blank cheque on spending other people’s money. It is stark to examine the differences in how we approach taxpayer-funded spending versus regulation cost-funded spending. At the moment, a Minister or official who wants to spend taxpayers’ money has a squillion different hoops that they have to jump through, and rightly so. There are lots of controls on that spending undertaken by the Treasury and followed up by the Public Accounts Committee, and I can see one of the senior members of that Committee here today, my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown). It is highly regulated and controlled, and great attention is paid to it in this Chamber.

However, if one wants to spend five, 10 or 100 times that amount of money by increasing the cost to business through regulation, there is not a peep. Much less attention is paid to those ways of spending cash, and that cannot be right. As everybody here will understand, a pound taken in tax has the same underlying economic impact on the country’s rate of growth as a pound taken in extra cost to business. We should treat both things with equal seriousness, rather than paying huge attention to one and largely blithely ignoring the other, while writing blank cheques. Any regime has to fix that problem as well.

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[Alex Davies-Jones]

May I briefly join the Minister in thanking all the members of the Public Bill Committee and the Clerks of the House? I give personal thanks to my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for working with me so collaboratively on getting the Bill to a good place. Let me also place on the record my thanks to Freddie Cook, in my team, for all her work on the Bill.

Labour welcomes this Bill, having led the way in calling for large tech companies to be properly regulated to ensure competition in digital markets. We are pleased to see the Bill in a good place as it goes to the other place for further consideration. We have long called for measures to protect consumers, enhance innovation and promote competition in digital markets to unlock growth and level the playing field for smaller businesses. That could not be more important in the midst of a cost of living crisis. We have supported the passage of this Bill and it is now important that these new powers that are given to the CMA to ensure competition in digital markets are not watered down as the Bill progresses. We will be following closely, as will colleagues from across the House, and we look forward to the Bill finally coming into action.

Online Safety Bill

Alex Davies-Jones Excerpts

Consideration of Lords amendments
Tuesday 12th September 2023 Commons Chamber

[Mr Deputy Speaker (Sir Roger Gale)]

I call the Opposition spokesperson.

[Alex Davies-Jones (Pontypridd) (Lab)]

Before I address the amendments at hand, let me first put on record my thanks for the incredible efforts of our colleagues in the other place. The Bill has gone on a huge journey. The Government have repeatedly delayed its passage, and even went to great effort to recommit parts of the Bill to Committee in an attempt to remove important provisions on legal but harmful content. For those reasons alone, it is somewhat of a miracle that we have arrived at this moment, with a Bill that I am glad to say is in a much better place than when we last debated it here. That is thanks to the tireless work of so many individuals, charities and organisations, which have come together to coalesce around important provisions that will have a positive impact on people’s lives online.

Today, we have the real privilege of being joined by Ian Russell, Stuart Stephens, Emilia Stevens, Hollie Dance and Lisa Kenevan, who have all been impacted by losing a child at the hands of online harm. I want to take a moment to give my most heartfelt thanks to them all, and to the other families who have shared their stories, insights and experiences with colleagues and me as the Bill progressed. Today, in our thoughts are Archie, Isaac, Olly, Molly and all the other children who were taken due to online harm. Today, their legacy stands before us. We would not be here without you, so thank you.

We also could not have arrived at this point without the determination of colleagues in the other place, notably Baroness Kidron. Colleagues will know that she has been an extremely passionate, determined and effective voice for children throughout, and the Bill is stronger today thanks to her efforts. More broadly, I hope that today’s debate will be a significant and poignant moment for everyone who has been fighting hard for more protections online for many years.

It is good to see the Minister in his place. This is a complex Bill, and has been the responsibility of many of his colleagues since its introduction to Parliament. That being said, it will come as no surprise that Labour is pleased with some of the significant concessions that the Government have made on the Bill. Many stem from amendments the Opposition sought to make early on in the Bill’s passage. Although his Department’s press release may try to claim a united front, let us be clear: the Bill has sadly fallen victory to Tory infighting from day one. The Conservatives truly cannot decide if they are the party of protecting children or of free speech, when they should be the party of both. Sadly, some colleagues on the Government Benches have tried to stop the Bill in its tracks entirely, but Labour has always supported the need for it. We have worked collaboratively with the Government and have long called for these important changes. It is a welcome relief that the Government have finally listened.

Let me also be clear that the Bill goes some way to regulate the online space in the past and present, but it makes no effort to future-proof or anticipate emerging harms. The Labour party has repeatedly warned the Government of our concerns that, thanks to the Bill’s focus on content rather than social media platforms’ business models, it may not go far enough. With that in mind, I echo calls from across the House. Will the Minister commit to a review of the legislation within five years of enactment, to ensure that it has met their objective of making the UK the safest place in the world to be online?

[Richard Burgon (Leeds East) (Lab)]

My hon. Friend is making an important speech. It is clear that the Government want to tackle harmful suicide and self-harm content. It is also clear that the Bill does not go far enough. Does she agree that we should support Samaritans’ suggested way forward after implementation? We need the Government to engage with people with lived experience of suicide and self-harm, to ensure that the new legislation makes things better. If it is shown—as we fear—not to go far enough, new legislative approaches will be required to supplement and take it further, to ensure that the internet is as safe as possible for vulnerable people of all ages.

[Alex Davies-Jones]

I thank my hon. Friend for that intervention. He has been a passionate advocate on that point, speaking on behalf of his constituent Joe Nihill and his family for more protections in the Bill. It is clear that we need to know whether the legislation works in practice. Parliamentary oversight of that is essential, so I echo calls around the Chamber for that review. How will it take place? What will it look like? Parliament must have oversight, so that we know whether the legislation is fit for purpose.

--- Later in debate ---

[Alex Davies-Jones]

On the small high-harm platforms that are now in the scope of the Bill, will the Minister join me in thanking Hope Not Hate, the Antisemitism Policy Trust and CST, which have campaigned heavily on this point? While we have been having this debate, the CST has exposed BitChute, one of those small high-harm platforms, for geoblocking some of the hate to comply with legislation but then advertising loopholes and ways to get around that on the platform. Can the Minister confirm that the regulator will be able to take action against such proceedings?

[Paul Scully]

I will certainly look at that. Our intention is that in all areas, especially relating to children and their protection, that might not fall within the user enforcement duties, we will look to make sure that the work of those organisations is reflected in what we are trying to achieve in the Bill.

We have talked about the various Ministers that have looked after the Bill during its passage, and the Secretary of State was left literally holding the baby in every sense of the word because she continued to work on it while she was on maternity leave. We can see the results of that with the engagement that we have had. I urge all Members on both sides of the House to consider carefully the amendments I have proposed today in lieu of those made in the Lords. I know every Member looks forward eagerly to a future in which parents have surety about the safety of their children online. That future is fast approaching.

I reiterate my thanks to esteemed colleagues who have engaged so passionately with the Bill. It is due to their collaborative spirit that I stand today with amendments that we believe are effective, proportionate and agreeable to all. I hope all Members will feel able to support our position.

Amendment (a) made to Lords amendment 182.

Lords amendment 182, as amended, agreed to.

Amendments (a) and (b) made to Lords amendment 349.

Lords amendment 349, as amended, agreed to.

Amendment (a) made to Lords amendment 391.

Lords amendment 391, as amended, agreed to.

Government consequential amendment (a) made.

Lords amendment 17 disagreed to.

Government amendments (a) and (b) made in lieu of Lords amendment 17.

Lords amendment 20 disagreed to.

Lords amendment 22 disagreed to.

Lords amendment 81 disagreed to.

Government amendments (a) to (c) made in lieu of Lords amendment 81.

Lords amendment 148 disagreed to.

Government amendment (a) made in lieu of Lords amendment 148.

Lords amendments 1 to 16, 18, 19, 21, 23 to 80, 82 to 147, 149 to 181, 183 to 348, 350 to 390, and 392 to 424 agreed to, with Commons financial privileges waived in respect of Lords amendments 171, 180, 181, 317, 390 and 400.

Ordered, That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendments 20 and 22;

That Paul Scully, Steve Double, Alexander Stafford, Paul Howell, Alex Davies-Jones, Taiwo Owatemi and Kirsty Blackman be members of the Committee;

That Paul Scully be the Chair of the Committee;

That three be the quorum of the Committee.

That the Committee do withdraw immediately.—(Mike Wood.)

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.

Electronic Trade Documents Bill [Lords]

Alex Davies-Jones Excerpts

3rd reading
Monday 10th July 2023 Commons Chamber

[Alex Davies-Jones (Pontypridd) (Lab)]

It is a very rare thing in this place to have the pleasure and privilege of responding on behalf of the Opposition to a Bill that we wholeheartedly support. For that reason, I will keep my comments brief.

As we know, the Bill follows a report and recommendations by the Law Commission. As the Minister has said, it seeks to remove the current legal impediment to producing documents in electronic form, allowing them to be legally recognised in the same way as paper documents, provided that they meet certain tests. It also sets out provisions relating to how the change of medium between electronic and paper documents will work in practice. It is an incredibly important Bill, particularly in a post-Brexit world where substantial red tape is having significant consequences for our ability to trade with the rest of the world. Labour sees the Bill as going some way towards unlocking that red tape by hopefully speeding up those processes.

We all know that central to international trade is the moving of goods across borders in order to get them from the seller to the buyer. That process typically involves multiple actors, including those involved in transportation, insurance, finance and logistics. One trade finance transaction can typically involve around 20 entities, and between 10 and 20 paper documents totalling over 100 pages. In a transaction covered by a bill of lading, for example, it is common to find 50 sheets of paper in a package of shipping documents that must be exchanged between as many as 30 different parties.

Despite the size and sophistication of the international trade market, many of its processes and the laws underlying them are based on practices developed by merchants hundreds of years ago. In particular, international trade still relies to a large extent on a special category of document that entitles the holder to claim performance of the obligation recorded in that document, and to transfer the right to claim performance of that obligation by transferring physical possession of the actual document. That document is said to embody the obligation, which may be to deliver goods or to pay money, rather than to merely evidence it. For example, a bill of lading is a document used in the carriage of goods by sea that, when transferred to the buyer or any subsequent lawful holder, gives that holder constructive possession of the goods described in the bill and a right to claim delivery of them from the carrier. The law governing those documents is premised on the idea that they can be physically held, or “possessed”. Industries using those documents are therefore prevented by law from moving to a fully paperless process.

To give a sense of the enormous amount of paperwork that international trade generates, the world’s largest container ships can carry 24,000 twenty-foot containers at any one time on any one voyage. For each of those cargoes, paper transport documentation has to be produced. That documentation must be processed manually to go from the shipper of the goods to the ultimate buyer at the destination, sometimes through numerous intermediaries. The effect of the current law is that much of the documentation needs to be in hard physical copy. The Digital Container Shipping Association has estimated that 16 million original bills of lading were issued by ocean carriers in 2020, and that more than 99% of those were in paper form. The Minister does not need reminding of the significant environmental cost of that way of working.

For those reasons, we support the Bill in its entirety. We see it as a long-overdue reform that allows for the legal recognition of certain types of documents used in trade and trade finance in electronic form. That will mean that parties can finally use the law that currently applies to paper trade documents when transacting with electronic trade documents. It was great of the Minister to confirm in Committee that the Department for Business and Trade will manage this legislation. We were concerned about where responsibility would actually sit, given that the Bill was brought forward by the Department for Science, Innovation and Technology and the Law Commission. We recognise and welcome that clarification and I am grateful to the Minister for it.

Labour sees the Bill as a valuable tool in ensuring that the world of trade and commerce operates as smoothly and efficiently as possible, and that UK businesses are not disadvantaged in any way. Ultimately, that is what we all want to see.

Artificial Intelligence

Alex Davies-Jones Excerpts

Thursday 29th June 2023 Commons Chamber

[Alex Davies-Jones (Pontypridd) (Lab)]

It is an honour to close this debate on behalf of the Opposition. I thank all colleagues for their contributions, and I pay tribute to the hon. Member for Boston and Skegness (Matt Warman) for bringing forward this interesting and thoughtful debate.

We can all agree that artificial intelligence has tremendous potential for social good. Indeed, we know that artificial intelligence technologies already contribute about £3.7 billion to the UK economy. There is some genuinely incredible innovation out there, much of which I have had the privilege of seeing at first hand over the past 18 months. Whether it be trained robots working with our armed forces as part of our defence and recovery efforts, apps to support female health or AI programmes that could one day make our working lives easier and more flexible, the opportunities really are endless.

It is no surprise, therefore, that the Government have been shouting as loudly as possible about their plans to capitalise on this innovation. However, it is crucial that innovation does not come at the expense of everyday working people. While Labour welcomes this debate, as a proud Welsh MP, I am clear that the Government need to go further to ensure that the discourse on AI and innovation is not focused entirely on the opportunities here in London.

That said, we can all recognise that technologies such as AI have the power to truly transform lives. This could range from improving medical services and delivering better, more efficient public services to working to deliver jobs and employment opportunities for all for generations to come. While AI and ChatGPT have been mentioned heavily today and are regularly in the headlines, much of this technology has been around for years or decades. I am therefore interested to hear from the Minister exactly why it took his Department so long to produce the long-overdue UK science and technology framework, which finally came out in March this year.

The same can be said of the Government’s AI White Paper, which is out of date just months after being published. In the White Paper’s foreword, the Secretary of State—the right hon. Member for Chippenham (Michelle Donelan)—claims:

“My vision for an AI-enabled country is one where our NHS heroes are able to save lives using AI technologies that were unimaginable just a few decades ago.”

However, that points to the exact issue with this Government’s approach to tech, which is that it absolutely fails to be forward-thinking.

The Government’s current plan does not place any new obligations on public bodies to be transparent about their use of AI. That was put most powerfully by my good friend, my hon. Friend the Member for Brent Central (Dawn Butler). AI tools need to meet accuracy and non-discrimination standards, and they need to ensure that there are proper mechanisms for challenge or redress when AI decisions do—as inevitably they will—go wrong. Instead, the White Paper promises a test and learn approach to regulation, which essentially translates to “hurt first, fix later”. This is a worrying approach for all involved. Let us be clear: our country is facing a choice right now about who benefits from the huge disruption that tech and AI will bring, and, in my hon. Friend’s words, we need to “stay sober”. Will it be those who already hold wealth and power, or will it be the starter firms trying to break in and disrupt the industry, the patients trying to book an appointment with their GP, or the workers using technology to enhance and improve their role?

The UK has many brilliant AI companies based here, and thriving sectors such as life sciences and professional services, which can support and capitalise on new technologies, but they risk being underutilised. The lack of certainty from the Government, who have no proper industrial strategy, is not only holding back UK tech businesses; it is stifling economic growth at the worst possible time. The reality is that other countries are already light years ahead. In Israel, police, fire and emergency services now come as a package deal, thanks to AI technology. Simple changes, such as having different phone numbers to call for separate emergency services, have allowed AI to play a central role in saving lives.

Of course, with any modernisation we must ensure that our laws keep up. Colleagues will be aware that the Digital Markets, Competition and Consumers Bill is in Committee right now, and that important Bill will go some way to address the large monopolies that have been allowed to proliferate online for far too long. Yet again, the Government have been too slow to act on getting the right balance between innovation and regulation. Labour recognises the challenges ahead, and none of us wants AI, or other intelligence technologies, to operate without proper regulation.

We recognise the concerns about risks, from the immediate to the existential, which need to be handled with care. However, the Government have failed even to cover the basics in their AI White Paper. Instead, they are doing as they have with too many other policy areas in this brief, and kicking the can down the road with consultations and road maps that will take up to two years to complete. I invite the Minister to imagine what technological developments will take place during that timeline, and I urge the Department to hurry up and get on with the job.

We have already heard that there are steps the Government could be taking right now to get ahead, including addressing growing calls for regulation to address foundation AI models. It does not take an expert to recognise that AI systems are not built from nothing, so what assessment has the Minister made of the merits of regulating those models now? I am sure he would have widespread support from colleagues, including those on the Conservative Benches, about concerns over AI, as well as from those who want to support start-ups and scale-ups, and who need clarity before developing their tech for the masses. We all want the UK tech industry to continue to thrive, but a responsible approach must also be part of that conversation.

The Government have an obligation to protect their citizens, and given their approach to online safety, with their last-minute amendments that severely weakened the Online Safety Bill, it will come as no surprise that I have concerns that this Government are not up to the job when it comes to regulating AI. That is why the Government must work harder to ensure that our laws are keeping pace. The only way we can ensure that they do is to have a Government in power who will harness technologies such as AI and constantly think to the future. It has become incredibly clear that that is not the Conservative Government’s approach, and I am afraid that their lines on tech are simply not getting traction with the public, well rehearsed though they are.

It is all very well that the Prime Minister spent London Tech Week meeting AI CEOs and announcing that the UK will soon host a global summit on AI, but the Government have done little to reassure everyday working families that their lives will be improved, not impacted, by developments in the tech industry. We cannot put people’s jobs at risk and simply hand them over to tech giants without thoughtful regulation. Many of our constituents have already paid a heavy price thanks to this Government’s utter mishandling of the energy crisis and the increasing cost of living. They deserve better than to have their jobs put at further risk if the Government fail to take a sensible approach to regulating tech and AI.

There is also much work to be done to ensure that the opportunities afforded by these sectors truly are open to all. When we speak about AI and innovation, it can often feel as though it is a closed conversation, open only to those with specific educational paths or career trajectories. Although it is clear that the Prime Minister has a personal interest in the industry—frankly, I am not sure we heard much from his predecessors in recent years about it—the barriers still exist.

Ultimately, two-thirds of employers are struggling to recruit workers with digital skills. Skills such as software engineering are no longer sector specific, and the economy of the future will require those with digital skills across all industries. AI technologies need more than just mathematicians and statisticians; there is also strong demand for designers, creators and people who can think creatively. Labour will ensure that we have the skills across our economy to win the global race for the technologies of the future, by establishing a new national body to oversee a national effort to meet the skills needs of the coming decades across all regions and nations of the UK.

The Government talk a great deal about levelling up, but we all know it must be more than just an empty slogan. I am keen to hear from the Minister about the exact steps his Department is taking to address these issues.

Lastly, and perhaps most importantly, these industries rely on our ability to get online. That is a simple premise for some, but the unfortunate reality is that it is not so easy for most people. The Government’s so-called commitment to getting people online is laughable. If they cannot get the basics right, including a reliable, fast broadband connection, how on earth can people across the UK be reassured that this Government’s approach to AI and tech will not see them worse off, too?

Broadband is central to powering our increasingly digital economy, but the Government’s slow roll-out has left parts of the UK, such as my hometown, stuck decades behind. In addition, once people are online, the Government have failed to legislate to educate. The Government have failed to commit to strong media literacy provisions in the Online Safety Bill. In fact, those were dropped in an earlier draft. How can we be assured that the Government will work to ensure that tech more widely is understood by the masses? The Government could have put these simple policies in place years ago, but instead they focus their efforts on landing press coverage for their minimal announcements during London Tech Week, which will, let us be honest, change little for the lives of the majority of people in the UK.

On the other hand, Labour is listening. We are ambitious for technologies such as AI, and we want to see them embedded in our everyday services, whether to speed up welfare claims or diagnose patients in hospitals. Labour is committed to doing so responsibly, and we will work in partnership with businesses to face the future and address the challenges, opportunities and risks head-on. The Government’s record on AI is limited, and far too often it is a case of too little, too late. Those in the industry are desperate for guidance, and Labour is all too ready to provide that clarity. I hope the Minister is listening.

Digital Markets, Competition and Consumers Bill (Ninth sitting)

Alex Davies-Jones Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

Let me cover the criminal offences in the regime, which largely mirror existing powers that the Competition and Markets Authority has in the Competition Act 1998. Criminal liability is important for deterring serious acts of misconduct in the context of information gathering and compliance monitoring, and will help to ensure that the digital markets unit can access relevant information.

Clause 91 makes it a criminal offence for an individual or firm to intentionally or recklessly destroy information, conceal information, provide false information, or cause or permit any of those actions. Those offences apply in relation to any of the powers provided for in chapter 6, which concerns information gathering and compliance reports.

Clause 92 makes it a criminal offence for a person to knowingly or recklessly give false or misleading information to the DMU in connection with any of its digital markets functions. It is also an offence for a person to knowingly or recklessly give false or misleading information to another person, knowing that it will be used by the DMU.

Clause 93 makes it a criminal offence for an individual to intentionally obstruct an officer of the DMU when lawfully entering a premises with or without a warrant.

Government amendment 34 seeks to clarify that named senior managers for information requests and nominated officers cannot be held criminally liable for not fulfilling their duties in those roles. As drafted, clause 94(2) broadens the definition of an officer of a body corporate. That would mean that individuals assigned to those roles could risk facing criminal proceedings on the basis of their assignment to the role. It has always been the policy intention that a named senior manager or nominated officer should face a civil penalty only where a firm with strategic market status has failed to comply with a relevant information request or compliance report and where the named individual failed, without reasonable excuse, to prevent that failure from occurring. The amendment would not prevent a senior manager or a nominated officer from facing criminal proceedings if they happen to also qualify as an officer of a body corporate under clause 94. I therefore hope that the Committee will support the amendment.

Clause 94 sets out that, in certain circumstances, where a body corporate commits a criminal offence, an officer of the body corporate can also be held criminally responsible. An officer of a body corporate can be, but is not limited to, a director, manager or secretary. An officer can be held criminally liable where the body corporate commits a criminal offence and the offence is attributable to that officer’s consent, connivance or neglect on their part. That will help to encourage officers in firms to take personal responsibility for their actions and will ensure that they are held accountable for any serious information offences.

Clause 95 limits the extraterritorial application of certain offences in the Bill, and I will set out our wider approach to extraterritoriality when we debate clause 110. Specifically, clause 95 states that a person cannot commit any of the part 1 criminal offences unless they have a UK connection, which is established when the person is a UK national, is habitually resident in the UK, or is a body incorporated under UK law. We have carefully considered the options and implications of restricting the extraterritorial application of criminal offences in this way. Although it is crucial that the CMA may apply its powers extraterritorially, they must be used only when strictly necessary and when a sufficient connection exists with the UK. In circumstances in which the person does not have a sufficient connection with the UK for the purpose of committing an offence, the CMA will still be able to enforce breaches of information requirements using civil penalties. That approach will ensure that, in exercising its powers, the CMA is respectful of the territorial jurisdiction of other nations.

Finally, clause 96 sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under clauses 91 to 93. Any person found guilty of one of those offences is liable on summary conviction to a fine. In England and Wales, that will be of an unlimited amount, and in Scotland or Northern Ireland it will be up to the statutory maximum. On conviction on indictment, a person is liable to imprisonment for up to two years, a fine or both.

[Alex Davies-Jones (Pontypridd) (Lab)]

I welcome the clauses in this grouping that outline the criminal offences, as the Minister has explained. We welcome their inclusion for clarity, and we are also grateful that they broaden the scope of the Bill to include specific provisions, particularly in clause 94.

We support the clarity and intention of Government amendment 34. It is important that the term “officer” has its usual meaning in relation to offences committed by officers as well as bodies corporate. This is an important clarification and we are grateful to the Minister for tabling the amendment.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clauses 92 and 93 ordered to stand part of the Bill.

Clause 94

Offences by officers of a body corporate etc

Amendment made: 34, in clause 94, page 56, line 14, leave out subsection (2).—(Paul Scully.)

This amendment removes a gloss on the definition of “officer” of a body corporate so that the term has its usual meaning in relation to offences committed by officers as well as bodies corporate.

Clause 94, as amended, ordered to stand part of the Bill.

Clauses 95 and 96 ordered to stand part of the Bill.

Clause 97

Director disqualification

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 35 and 36.

Clauses 98 to 101 stand part.

[Paul Scully]

I will now cover the remaining enforcement measures in the regime, and the appeals process. Clause 97 gives power to the DMU to apply to the court to disqualify a director of a UK-registered company that forms part of a firm with strategic market status, where that firm has breached the digital markets regime. That will allow the DMU to use the Company Directors Disqualification Act 1986, as the CMA does currently under the Competition Act 1998, when an SMS firm infringes the regime and the director’s conduct makes them unfit to be involved in the management of a company. That helps to protect UK businesses and the public from individuals who abuse their role and status as directors.

Government amendment 35 clarifies that costs relating to a court order under clause 98 can be made against any person that has breached the relevant requirement, whether or not they are an undertaking. The amendment changes the wording in subsection (3) to reflect the rest of the clause, which applies to persons—in practice, meaning a legal entity forming part of an SMS firm. I hope the Committee supports the amendment.

Government amendment 36 seeks to clarify in clause 98 that where a firm is responsible for the failure to comply with a relevant requirement, a costs order can be made against any officer of the relevant firm.

Clause 98 allows the DMU to apply for a court order where an SMS firm fails to comply with a regulatory requirement and, where relevant, a subsequent order or commitment intended to bring them back into compliance. A breach of a court order is a serious offence that can eventually lead to an unlimited fine and/or imprisonment for officers of the undertaking in question if it is not complied with. The threat of a court order is a key backstop for ensuring SMS firms comply with the regime.

Clause 99 makes explicit provision to allow parties to seek redress privately if they suffer harm or loss when an SMS firm breaches a requirement imposed by the DMU. Redress will be available when an SMS firm breaches a conduct requirement, pro-competition intervention or commitment to the DMU.

Clause 100 sets out that the CMA’s final breach decisions are binding on the courts and the Competition Appeal Tribunal to which redress claims can be made. The court or tribunal will only consider what a suitable remedy would be. That will encourage harmed parties to assist the DMU during investigations into suspected breaches of the regime.

Clauses 99 and 100 strike the right balance of ensuring there is a clear and effective route to redress, while ensuring that the regime’s focus is on public enforcement.

Clause 101 provides that decisions of the DMU, made in connection with its digital markets functions, can be appealed to the Competition Appeal Tribunal. When deciding these challenges, the CAT will apply judicial review principles. Valid grounds for appealing decisions of the DMU could include challenging whether it acted lawfully and within its powers, applied proper reasoning or followed due process, as well as, in some circumstances, whether the DMU’s decision was proportionate. That is with the exception of decisions relating to mergers, which will be brought under the existing process for merger appeals set out in the Enterprise Act 2002. That will ensure that there is a consistent appeals regime for all merger decisions.

Judicial review will allow for appropriate scrutiny of the DMU’s decisions in the digital markets regime, ensuring that the DMU is accountable for those decisions, that they are fairly and lawfully taken, and that the rights of businesses are protected. I am sure we all remember the oral evidence: the majority of people in front of us were clear that this was the right approach, and was proportionate.

[Alex Davies-Jones]

Clause 97 is important in that, as the Minister said, it enables the disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. Labour sees that as an important step in ensuring that individuals who have not abided by the terms of this regime are not able to continue in their role. The clause specifically inserts new text into the Company Directors Disqualification Act which allows for these provisions. We welcome that this disqualification can be for up to 15 years—a significant yet fair period—and support the Government’s approach. We therefore support clause 97 in its entirety and think that it should stand part of the Bill. I am pleased to confirm that we also support Government amendments 35 and 36.

I will now move on to clauses 98 to 101. On clause 98, we particularly agree with the logical step set out in subsection (1). Its clarification means that, in the event of any initial breach of a conduct requirement that occurs before an enforcement order has been put in place or a commitment has been accepted, it cannot be enforced with a court order. We also agree with the intentions of subsection (3). Again, these are sensible approaches which we support. On the whole, we believe clause 98 to be an important step in establishing and rooting the CMA’s powers on a statutory footing. For that reason, we are happy to support it standing part of the Bill.

A fair regulatory regime must include provisions around seeking compensation, so we welcome clause 99. We particularly welcome subsection (2). We further welcome the clarity that subsection (4) affords. Again, these are simple clauses that we see as logical and sensible. We are happy to see their inclusion.

I now come to the most important clause in the Bill: clause 101. The Minister will be pleased to know that I have plenty to say on it. Subsections (8) to (10) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. That is an incredibly important point and one which the Government must maintain. The DMU will ultimately have the power to make pro-competitive interventions to reduce SMS firms’ market power and to review more of their mergers. That means that they will be able to make significant changes to SMS firms’ business models with the objective of opening up their ecosystems and levelling the playing field for other businesses. The benefits of doing so are significant, and I am sure we will touch on them in sessions to come.

In the current version of this Bill, the standard of review that applies to DMU decisions is the judicial review standard generally used for authorities that make forward-looking assessments, rather than the “merits” standard used for certain competition law enforcement decisions by the CMA. That means that parties will be able to apply to the Competition Appeal Tribunal to review the legality of the DMU’s decisions, focusing on the principles of irrationality, illegality and procedural impropriety. That is an extremely important point and is consistent with other regimes, so the Government must not bow down to pressure here and adopt a “merits” appeals approach. As the Minister quite rightly said, we heard from countless witnesses during our oral evidence sessions who said the same.

We know that judicial review appeals are more streamlined than merits appeals and they can last a matter of days, rather than weeks, years or even decades. Under this Government, our courts are already facing significant backlogs—perhaps the less said about that the better—but there is no reason why we should subject this regime and the appeals principle to even further delay. We recognise the pressure that the Government are under here; clearly, potential SMS firms and their advocates oppose the adoption of the JR standard. It is obvious that a company that may be negatively impacted by this new regime would seek to obstruct or delay it by arguing for an appeals process that incorporates a consideration of the merits of the case.

However, Labour strongly believes that the current drafting is fair and well aligned with other regulatory regimes. For far too long, big tech has had the ear of this Government and has been able to force the hand of many of the Minister’s colleagues when it comes to online safety provisions. The Minister must reassure us that that will not be the case. I look forward to his confirmation.

[Paul Scully]

I appreciate the hon. Lady’s approach to the appeals standard, which she has taken in regard to the measures throughout the Bill. The Government speak to larger companies and smaller challenger companies, because it is really important that we get this right. I can assure the hon. Lady that there is no way we are going to weaken the appeals structure. We will always make sure that we listen and do things fairly. In no way will the structure be watered down such that challenger tech cannot come through. It is important we ensure that the Bill in its final form is the best it can be and is fair and proportionate.

Question put and agreed to.

Clause 97 accordingly ordered to stand part of the Bill.

Clause 98

Enforcement of requirements

Amendments made: 35, in clause 98, page 58, line 23, leave out “undertaking” and insert “person”.

The requirements to which clause 98 relates can apply to persons other than undertakings. This amendment clarifies that a costs order under this clause can be made against any person, whether or not they are an undertaking, who fails to comply with a requirement.

Amendment 36, in clause 98, page 58, line 25, leave out paragraph (b) and insert—

“(b) where the person responsible for the failure is an undertaking, any officer of a body corporate that is or is comprised in that undertaking.”—(Paul Scully.)

This amendment clarifies the circumstances in which a costs order under this clause can be made against an officer of a body corporate.

Clause 98, as amended, ordered to stand part of the Bill.

Clauses 99 to 101 ordered to stand part of the Bill.

Clause 102

Extension etc of periods

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Alex Davies-Jones]

Clause 102 is incredibly important if the CMA and, subsequently, the DMU are to be able to be an accountable body that consumers and businesses—and parliamentarians—have confidence in. This clause allows the CMA to extend various deadlines in part 1 of the Bill by up to three months where there are “special reasons” to do so. Those may include, for example, illness in the CMA investigation team. These are important provisions to ensure that the CMA is able to extend relevant investigations by up to three months.

We think it reasonable that the clause does not define the exact parameters of “special reasons”. We support a common-sense approach and therefore anticipate that those would include matters such as the illness or incapacity of members of an investigation team that has seriously impeded their work, and an unexpected event such as a merger of competitors. We further support the need for the CMA to publish a notice to trigger an extension under this clause. However, the Minister knows how important it is that these notices are made public, so I hope that he can clarify that that will be the case here.

It is right and proper that subsection (7) outlines the interaction between SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking and needs to extend it, that investigation may not conclude until the original designation has expired, meaning the undertaking would fall outside the regime before the need for continued SMS designation is confirmed. The clause enables the SMS designation to be extended to match the length of the SMS investigation period and is a sensible approach that Labour supports.

We also welcome the provisions around clause 103, allowing the CMA to extend an SMS designation by up to three months. That speaks to the nature of an agile and flexible regime, which we ultimately all want and support. Government amendment 37 prevents decisions about whether and how to exercise the power in clause 17 being delegated to a member of the CMA’s board or a member of staff of the CMA. We consider that to be an appropriate response.

Clause 104 is crucial all round because it explains how decisions will be made under the digital markets regime and has practical applications in establishing exactly how the functions within the CMA will be able to operate when implementing the legislation. Notably, subsections (1) to (5) provide the CMA with the ability to create groups. The CMA must state the function for which such a group is established and the group will be required to fulfil that function. Can the Minister confirm where that information will be reported? Again, it will be helpful for us all to understand how that will work in practice.

We also value the clarifications outlined in the clause, which establish that to be eligible to carry out the functions under subsection (2A), a committee must include at least two CMA board members, which can include the chair. Furthermore, a majority of the committee’s membership must be non-staff or CMA panel members. We welcome the clarification that any changes of this nature would need to be laid before and approved by each House of Parliament before being enacted. Can the Minister confirm whether the Secretary of State will be required to be consulted under the provisions? That aside, we support the clause and believe it should stand part of the Bill.

We support clause 105 and welcome the clarification that a notice may be given to the particular individuals specified in subsections (3) to (5). This is an important clause that will allow the CMA to fulfil its obligations as the regulator. We also welcome clause 106, which outlines the requirements that will ensure the CMA has to consult specific named regulators, and welcome the clarity that those five regulators are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and Ofcom. It is positive that they are outlined in the Bill. They are all established and relevant regulators that are subject to their own vast regulatory regimes, so Labour supports their involvement in assisting the CMA to regulate the regime proposed in the Bill. Again, we feel that subsection (6) is fair and reasonable. We particularly approve the fact that it is proportionate and we are happy to support it.

If clause 106 forces the CMA to consult the specific named regulators, it is only right that clause 107 sets out the formal mechanisms to be exercised under their regulatory digital markets function and that they are in the Bill too. We welcome the clarification on the timeframes, particularly around the fact that the CMA must respond to each relevant regulator within 90 days, setting out what action, if any, it has taken or will take and the reasons for that decision. It is important that those time periods are established in the Bill so as not to delay the CMA in taking action on a firm that is not operating in alignment with the regime.

For transparency purposes, we are also pleased to see the summaries of the CMA’s responses and that they must be published online. I am sure the Minister is pleased that that is included. We will come on to that matter as we address further clauses, particularly clause 112.

We welcome clause 108, which we see as a procedural clause that additionally extends current provisions to enable information sharing between the CMA and the Information Commissioner’s Office where that facilitates the exercising of one of their respective statutory functions, and we support the clause’s intentions. Information sharing must be encouraged between the agencies to allow for a regulatory regime to work in practice and be robust. It is right that the clause makes amendments to the Communications Act 2003 and the Enterprise Act 2002, which we see as vital for the regime to work in practice. We therefore support the clauses and believe they should stand part of the Bill as fully drafted.

Labour fully supports the provisions in the Bill to ensure the CMA has sufficient power to collect a levy from designated undertakings to recoup the costs associated with delivering the digital markets regime. We see that as a positive and effective way of encouraging compliance, but also an important way of generating funds to ensure the sustainability of the digital markets regime more widely. The polluter pays model is commonplace in a wide range of policy areas and it can be immensely effective. We therefore welcome the provisions in full. I do not need to address each subsection individually because the overall message is the same. SMS firms should absolutely pay a levy. For far too long they have got away with having considerable power and profit, and the time for them to have a statutory obligation to support measures such as those outlined in the Bill is well overdue.

We support the provisions in Government amendment 38, which we hope will go some way to assist should penalties have to be invoked by the CMA. The amendment permits notices to be served on people outside the UK if the CMA is considering imposing a penalty. Again, that is appropriate, and the Minister can be assured of our support. We feel that the provisions in clause 110 are fair and in alignment with similar regimes already in place, so we are happy to support it too. This is all becoming very collegiate.

Clause 111 protects the CMA against legal action for defamation as a result of its exercise of functions under the digital markets provisions in this part, and we support it entirely.

We welcome the provisions outlined in clause 112, which confirms the CMA’s duties to consult and publish statements online. As the Minister will be aware, any measures around transparency must factor in an element of consultation and transparency, so we welcome the clarifications that clause 112 affords. Colleagues will note that subsection (1) makes provision for when the CMA consults and publishes a statement. We think that it makes perfect sense. We are happy to support it, and wish to see that transparency echoed throughout the Bill.

Clause 113 is again welcome because it sets out the CMA’s obligation to publish guidance. It is important to have confirmation that the CMA will be able to revise or replace any guidance that it publishes, but must publish the revised or replacement guidance. While we recognise that that could include industry associations with a particular interest in the specific guidance in question, I would be grateful if the Minister would clarify whether others may be consulted in the instance of revised guidance being published? That aside, we support the intention behind clause 113 and believe that it should stand part of the Bill.

Clause 114 is particularly important. In the case of a large corporate group whereby a designated undertaking may be part of a wider body, it is important that that is defined within the Bill and interpreted when used throughout the Bill. Turning to Government amendment 39, we of course support the need to ensure that the definition of

“relevant service or digital content”

is consistent with the definition of “digital activity”, so we will support the amendment. We welcome clause 115 and do not disagree with any of the definitions outlined therein. We see them as fairly standard, as long as they are applied with common sense. We therefore fully support the clause.

Lastly, turning to new clause 4, we have already touched on this to some extent in previous debates. The aim of the new clause is clear: we want there to be more transparency over the function of the CMA’s regime. Particularly when it is in its infancy, the information will be extremely useful to businesses, civil society, academics and parliamentarians alike. It will also be important for other jurisdictions to have a meaningful way of understanding the regime, particularly if we want it to be world leading, when considering options for their own legislation.

I hear the Minister’s comments regarding replication of work and the need for the independence of the CMA, but it is right that Parliament has that scrutiny and overview. I would welcome his commitment to ensure that Parliament will have a mechanism by which to review the activity of the CMA via a regular report. If he could commit to me that that will be the case, we will not need to press the new clause to a vote.

[Paul Scully]

I thank the hon. Lady for her approach. Let me answer some of her questions. Notices will be made public, and information about the groups will be reported online. Under clause 104, the Secretary of State would not need to be consulted because, again, it is an independent regulator, so mandatory consultation with the Secretary of State is not necessarily appropriate. On clause 113 and who will be consulted on the revised guidance beyond industry, it will be relevant stakeholders, such as SMS firms themselves, other regulators such as Ofcom and the ICO, businesses likely to be affected by the decisions, and consumer groups. A wide-ranging consultation will be required to ensure that the regime works properly.

I think I can give the hon. Lady the assurance that she is looking for on new clause 4. It is really important that Parliament continues to be able to scrutinise the regime effectively. I do not think that it is appropriate to take the approach that the Secretary of State needs to do another form. It is less to do with duplication; it is more to do with the fact that if the Secretary of State is putting forward his or her own report, that might undermine the report that the CMA is doing. The CMA has an annual report, which it will publish at the end of each financial year. It will include a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. That should be enough for Parliament to scrutinise that report and the work of the CMA and the DMU. I am happy to give that assurance that Parliament has that scrutiny and oversight.

--- Later in debate ---

[Paul Scully]

I hope my voice will stand up to this level of scrutiny. Part 2 of the Bill focuses on the UK’s existing competition regime. First, I will explain that while the CMA is the principal regulator responsible for the public enforcement of the prohibitions in part 1 of the Competition Act 1998, its functions are also exercisable concurrently by sector regulators, such as Ofgem and Ofcom, among others. The measures in clauses 116 to 120 and clause 135, and when we reach them clauses 136 and 137 and schedules 8, 9 and 11, affect the CMA and sector regulators. For the sake of brevity, I will just refer to the CMA.

Clause 116 extends the territorial reach of the chapter 1 prohibition in the Competition Act 1998. The prohibition relates to anti-competitive agreements, decisions by associations of undertakings or concerted practices, hereafter simply referred to as agreements. The chapter 1 prohibition captures agreements that have as their object or effect the prevention, restriction or distortion of competition within the UK, and which may affect trade within the UK. Currently, it is limited to agreements that are, or are intended to be, implemented within the UK. The extension in reach of the chapter 1 prohibition means that agreements implemented, or intended to be implemented, outside the UK are also captured, but only where they would be likely to have immediate, substantial and foreseeable effects on trade within the UK.

Clause 117 introduces a new duty to preserve documents on persons who know or suspect that an investigation is being, or is likely to be, carried out under the Competition Act 1998. The duty will apply from when a person knows or suspects that an investigation by the CMA is under way or likely to occur. Where a person has a reasonable excuse for not complying with the duty, no liability for a penalty will arise. A reasonable excuse could include something out of an individual’s control, such as an IT failure.

Clause 118 strengthens the CMA’s powers to require the production of electronic information stored remotely—for example, in the cloud—when executing warrants to enter business or domestic premises. Under this reform, the CMA will be able to require the production of information for the purposes of its investigation without needing to demonstrate when making the request the specific relevance of the particular dataset to be produced. It will then be able to take copies or extracts only of information that is relevant to the investigation. The CMA will also be able to operate equipment to produce remotely stored information itself. Clause 134 makes similar amendments to the CMA’s power to require the production of electronic information when executing a warrant during an investigation into a suspected criminal cartel offence under part 6 of the Enterprise Act 2002.

Clause 119 amends part 1 of schedule 1 to the Criminal Justice and Police Act 2001, to include the power of the CMA to undertake an inspection of domestic premises, under section 28A of the Competition Act 1998. That means that when the CMA undertakes an inspection of domestic premises, it will have access to the same seize and sift powers as are already available to it when it inspects business premises under a warrant.

Clause 135 also concerns the CMA’s investigative powers. First, it expands the CMA’s power to require persons to answer questions for the purposes of a Competition Act 1998 investigation, so that it applies regardless of whether the person has a connection to a business under investigation. The CMA will be able to require individuals to answer questions only where they have information that is relevant to an investigation. Secondly, the clause amends the CMA’s powers to require individuals to answer questions across its Enterprise Act 2002 markets and mergers and Competition Act 1998 functions, so that it can specify that interviews for those purposes should take place remotely.

Clause 120 amends the standard of review applied by the Competition Appeal Tribunal in appeals against interim measure decisions from full merits to judicial review. Interim measures are temporary directions that the CMA has the power to give during an investigation under the Competition Act 1998. To be an effective tool in fast-moving modern markets, it is essential that interim measures can be implemented efficiently. Judicial review will provide a flexible and proportionate standard of review, ensuring the CMA is held accountable appropriately for its decisions.

Clause 121 introduces schedule 3 to the Bill, which amends the Competition Act 1998 to empower the Competition Appeal Tribunal to grant declaratory relief in private actions claims under the Competition Act 1998. Declaratory relief is a remedy that involves a court making a legally binding statement on the application of the law to a set of facts.

Clause 122 gives the Competition Appeal Tribunal, the High Court of England and Wales, the Court of Session and sheriff courts in Scotland and the High Court in Northern Ireland the ability to award exemplary damages in private competition claims. This will help deter and punish particularly egregious conduct and ensure that those impacted by the most reckless breaches of competition law can be awarded additional damages.

Clause 123 amends section 71 of the Serious Organised Crime and Police Act 2005 to designate the CMA as a specified prosecutor. This designation will allow the CMA to enter into formal agreements with an offender who has assisted or offered to assist its criminal cartel offence investigations. For example, if it considered it appropriate, the CMA could agree not to use specified information against them in any criminal proceedings. Agreements to provide assistance can also be taken into account by the courts when sentencing an offender, or their sentence could be referred back to the court for review. These measures do not enable the CMA to offer immunity from prosecution.

[Alex Davies-Jones]

Part 2 focuses on the competition elements of the Bill. I am pleased to see clause 116, which expands the territorial reach of parts of the Competition Act 1998. Labour recognises the importance of ensuring that legislation already on the statute book is aligned with the intentions behind the Bill, because we understand that regulation of our digital markets will draw on existing competition law. We therefore welcome the clause, which will expand chapter 1 of the 1998 Act. The chapter 1 of the 1998 Act considers only undertakings and decisions that might affect trade within the UK, and which have as their object or effect the prevention, restriction or distortion of competition. At the moment, those behaviours are prohibited only where they are, or are intended to be, implemented in the United Kingdom, but we need to consider the impact of agreements, decisions and practices that might affect trade within the United Kingdom. Subsection (2) of the clause will replace the existing section of the 1998 Act to ensure that a consideration of the effect on trade will be considered. That is particularly important in the context of digital markets because they operate on a global level.

The clause goes some way to address the lack of futureproofing in the Bill more widely. The Minister knows my thoughts on that, and knows the Bill should go further in that regard. That aside, we welcome subsection (3), which will repeal the existing equivalent in the 1998 Act. The introduction of the qualified test will ensure that UK trade and businesses and consumers based in the United Kingdom, are protected from any detrimental effects of anti-competitive conduct, regardless of where that conduct takes place. That is welcome, and we consider the measure to strike a positive balance.

We welcome the clarity and the changes to the 1998 Act that will bring important provisions of the Bill into line with existing legislation. We have therefore not sought to amend the Bill, and we support those measures being part of it.

Clause 117 is important in that, once again, it will amend part 1 of the 1998 Act. We know that big companies can often be smart in concealing, or even overloading, information relevant to regulatory regimes, and we have seen that happen time and again when it comes to online safety. Labour does not want the same detrimental behaviours to be allowed to continue within this regime. We therefore welcome the provisions in the clause, particularly proposed new section 25B, which sets it out that the duty applies where

“a person knows or suspects that an investigation by the CMA… is… or is likely to be carried out.”

The inclusion of a person “suspecting” is important, and, in theory, it will push companies to abide by their duties. Recently, we have seen those at the heart of Government in the news owing to their failure to produce vital documents in investigations of the covid-19 pandemic, so it is very welcome indeed that the Government appear to have learned their lessons and worked to ensure that designated companies will not be able to circumvent the regime, as a former Prime Minister has attempted to do.

Let me get back to the Bill and the matters at hand. In practice, those duties will arise where a business receives a case initiation letter from the CMA, so it will be perfectly aware that its conduct is under investigation. Such duties might further arise when, for example, an individual working for a business is aware that a customer has reported their suspicions of price fixing, and that the customer has been interviewed by the CMA, or members of an anti-competitive agreement have been “tipped off” that a member of the agreement has blown the whistle to the CMA. Those are important clarifications, which we welcome. We therefore support their inclusion in the Bill.

We support clause 118, which specifically amends sections 28 and 28A of the 1998 Act, and we support the clarity with respect to the execution of such warrants—for example, a named CMA officer has the power to require the production of information that is held electronically and is accessible from the premises. It is a positive step to have these amendments to the 1998 Act, which will expand the powers of the court or the CAT to grant a warrant to the CMA based on the fact that there are reasonable grounds to suspect that there are documents relating to an investigation that are accessible from the premises, when the other criteria set out in the section are met. Those powers will apply to any information stored electronically, and we hope and expect that the provisions of the clause will rarely be used. Despite that, we fully support their inclusion. It is right and appropriate that businesses and other jurisdictions looking closely at the Bill have a sense of the process that will result in the event of the CMA being forced to act on a warrant. The clause and others in this part of the Bill are an important part of ensuring compliance, and we therefore welcome the provisions in full.

Clause 119 is, once again, an important clause that will amend existing legislation. The powers of seizure conferred by section 28 of the 1998 Act are already specified for the purposes of section 50 of the Criminal Justice and Police Act 2001, so the amendment will align the powers available to the CMA whether it is inspecting business or domestic premises under a warrant, and it will make consequential changes in the light of those made by clause 118. These practical clauses will make important changes to legislation to bring other provisions in line with the Bill.

--- Later in debate ---

[Alex Davies-Jones]

Labour welcomes the provisions in the clause which establish that transactions within jurisdiction can be reviewed by the CMA, although no obligations or requirements are imposed on businesses by being in scope. Schedule 4 introduces the new acquirer-focused threshold, as well as introducing a small merger safe harbour that is primarily targeted at reducing the regulatory burden faced by small and micro businesses—the burden that we heard about in our evidence sessions. We support the clause standing part.

Schedule 4 makes several changes to the thresholds, which determine what transactions are within the jurisdiction of UK merger control. As I have noted already, the UK’s merger control regime is voluntary, meaning that there is never on obligation to notify a transaction to the CMA. However, when the existing jurisdictional thresholds in the Enterprise Act 2002 are met, the CMA may review a transaction even if it is not notified. The CMA has such jurisdiction if: the target’s UK turnover in its most recently completed financial year exceeded £70 million; or the parties have a combined share of supply of 25% or more in relation to any product or service in the UK or a substantial part of the UK. This schedule will clarify some significant changes to those thresholds, which Labour welcomes.

Schedule 4 introduces a new threshold that will grant the CMA jurisdiction to review transactions where one party has a UK share supply of at least 33% and UK turnover exceeding £350 million. We see the new threshold as largely capturing killer acquisitions, in which a larger firm acquires a smaller and possibly innovative firm, potentially with a view to eliminating the threat of future competition. The CMA’s existing 25% share-of-supply threshold has already shown itself to be flexible in capturing many such transactions, but it is estimated that the new threshold will lead to an increase of between two and five phase 1 cases per year. That is to be applauded.

The new £350 million threshold is aimed at expanding the CMA’s jurisdiction, but other sections of schedule 4 seek to reduce the burden on merging companies by removing certain transactions from the CMA’s jurisdiction. By increasing the target turnover threshold from £70 million to £100 million, it is estimated that the changes to the turnover test will lead to a reduction of two or three phase 1 cases per year. In addition, the Government have proposed an interesting solution with the introduction of a safe harbour threshold to the existing share-of-supply test where, even if the 25% share of supply threshold is met, the CMA would not have jurisdiction if no party to the transaction had more than £10 million of UK turnover.

Labour recognises that it would be inappropriate to burden the CMA unnecessarily, but we are keen to have an understanding of how schedule 4 will operate in practice. Has the Minister considered introducing an annual reporting mechanism that would allow for more transparency on whether the approach is working? That aside, we certainly and carefully support the intentions of this schedule.

We welcome the provisions of clause 125 and are pleased to see that particular attention has been given to merger situations. Labour recognises that designated companies often buy other companies or merge with them, so it is only right that the CMA is empowered with the appropriate tools to investigate in such circumstances, where necessary. As we know, at present the UK’s merger control regime is voluntary, meaning that there is never an obligation to notify the CMA of a transaction. However, as I have said, when the thresholds in the Enterprise Act are met, the CMA may review a transaction despite not having being notified of it.

Clause 125 is relevant because it amends part 3 of the Enterprise Act to enable the CMA to fast-track a merger to an in-depth phase 2 investigation if it receives a request from the parties involved to do so. That is an important step in streamlining merger review procedures and timelines by removing certain statutory duties on the CMA that currently limit the benefits and use of the existing, non-statutory fast-track procedures. This fast-track process gives the CMA more flexibility to deliver quicker and more efficient merger investigations without prejudicing the quality of the review. We welcome the clarifications in clause 125 and support its standing part of the Bill.

We welcome schedule 5, which amends the Enterprise Act to enable the CMA to fast-track these mergers. In particular, we support the clarification that the CMA may launch a phase 2 investigation only if it believes that a completed or anticipated merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom. We also support the clarification of the circumstances in which the CMA can accept a fast-track reference request.

When making these decisions, the CMA must have regard to whether the merger could raise public interest issues or whether a special public interest intervention has been launched under provisions in the Enterprise Act, to ensure that no case is unduly fast-tracked. Schedule 5 is important and will be central to ensuring the CMA can work at pace in the case of any merger requiring investigation. We welcome and support it.

Labour fully supports the intentions of clause 126. The timetable for phase 2 investigations is important for the timely resolution of merger investigations, and we believe the approach outlined to be sensible. As it stands, section 39 of the Enterprise Act, which outlines time limits, requires the CMA to publish its report on a merger reference within 24 weeks of the date of the reference. Clause 126(2) amends that provision to give the CMA the power to extend the period if necessary. We welcome the clarity that the length of an extension has to be agreed between the CMA and parties involved in the potential merger.

We also acknowledge that, while the Bill does not specify circumstances in which the CMA and the parties involved in a merger can agree an extension, an extension is most likely to be helpful in support of early consideration of remedies or in multi-jurisdictional mergers that are being reviewed in other countries in parallel to the UK. We welcome that distinction. Labour has consistently said that for the regime to work in practice it must be flexible. We see clause 126 as an important step towards that aim and are therefore happy to support its inclusion in the Bill.

As I said with respect to clause 126, Labour supports flexibility to extend time limits, and we feel that is particularly important where there is a public interest to do so. That is why we support clause 127. The clause amends chapter 2 of part 3 of the Enterprise Act, which sets out that the Secretary of State may intervene in the consideration of a merger where the Secretary of State believes it raises a public interest consideration that needs to be taken into account. We feel that this is an appropriate and proportionate way of ensuring accountability for public interest interventions, and that the Secretary of State should be empowered to do so. We therefore support the intentions of clause 127 and, again, believe that it should stand part of the Bill.

Finally, clause 128 replaces the obligation on the CMA in section 96(5) of the Enterprise Act to publish the latest form of the merger notice

“in the London, Edinburgh and Belfast Gazettes”

with an obligation to publish it online. We welcome that transparency. The Minister knows my views on transparency with respect to the Bill more widely. I wish that provision about online publication was replicated elsewhere in the Bill, so that information is available to anyone who wishes to see it. We welcome clause 128 and hope to see it replicated.

[Paul Scully]

Indeed, a lot of the publication is done online, as we have discussed, even if that is not stated specifically in the Bill. I hope the hon. Lady takes heart in that.

The hon. Lady asked specifically about schedule 4 and safe harbours. Clearly, we would expect the CMA and the Government to review the merger review thresholds regularly, and there are powers to amend the thresholds if and when it is considered appropriate to reflect economic developments or, indeed, because of the experience of enforcing the thresholds, as she rightly said. The CMA board is accountable to Parliament, as we have described. We expect that, through its annual plan and performance reports, Parliament will be able to scrutinise the decisions that have been taken.

Question put and agreed to.

Clause 124 accordingly ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 125 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 126 to 128 ordered to stand part of the Bill.

Clause 129

Market studies: removal of time-limit on pre-reference consultation

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Paul Scully]

The UK’s markets regime is the CMA’s most powerful tool for promoting competition in UK markets. Clauses 129 to 133 reform the markets regime, ensuring that it is effective, focused and proportionate.

Clause 129 reforms the market study process. Currently, the CMA or sector regulator must start a consultation on making a market investigation reference, or decide not to make a reference, within six months of the start of a market study. That timeframe is unduly restrictive. The clause removes the six-month time limit, giving flexibility for the consultation to start at the most appropriate point. It allows extra time to gather evidence, ensuring that information that comes to light later on can be considered.

Clause 130 makes amendments so that references can be targeted appropriately, to better define the scope of the investigation required. It further narrows the questions that the CMA group must consider, reflecting the scope set out in the reference. This will allow the CMA to ensure that its work is targeted effectively, which will benefit businesses and investors.

Clause 131 introduces schedule 6, which expands the use of voluntary undertakings that remedy competition harms. The clause allows the CMA to accept such undertakings at any stage in the market inquiries process. This includes the acceptance of partial undertakings that address some features causing concerns in a market, but not all. The flexibility to take issues “off the table” by accepting such undertakings, alongside the amendments made by clause 132 regarding narrowing the scope of investigations, will help to provide greater flexibility in the regime. We recognise that voluntary undertakings will not be appropriate in every case. Where they are appropriate, they will drive efficiencies and enable faster results. They will also help to tackle competition problems and any resulting consumer harm as quickly as possible.

Clause 132 introduces schedule 7, which gives new powers to the CMA to conduct trials of certain types of remedies at the conclusion of a market investigation where an adverse effect on competition has been identified. That will help to ensure that any final remedy is suitable and effective. For now, the power to trial remedies will be limited to solutions that relate to the provision or publication of information to consumers. That is the area where trials are most likely to be useful and enables a proportionate approach to introducing this new power. The Secretary of State will be able to expand the scope of remedies to trial in future, subject to the draft affirmative procedure.

Clause 133 gives the CMA new powers to amend ineffective remedies where less than 10 years has passed since the original market investigation. Where the CMA decides that remedies have been ineffective and should be varied, it will be required to consult with affected businesses before reaching a final decision on whether to vary a remedy, and to conclude the variation within six months. In cases where the Secretary of State has accepted or imposed remedies, the CMA will provide advice to the Secretary of State. This new power will be constrained by a mandatory two-year cooling-off period, beginning at the end of a remedy review.

[Alex Davies-Jones]

I will speak briefly to clause 129 before addressing our thoughts on the rest of the group. Labour supports the intentions of the measures in the group, and we have not sought to amend them at this stage.

The removal of the time restriction outlined in clause 129 gives the CMA flexibility and more time to gather evidence to determine when the consultation process should commence. That is something I think we can all get behind and fully support.

Schedule 6 outlines the process by which the CMA will be able to accept voluntary commitments during all stages of a market study and a market investigation. It allows the CMA to accept partial undertakings, to narrow the issues that require further investigation. We see these features as central to a flexible regime that firms want to easily engage with. That must be at the heart of any fully functioning and appropriate regime.

Clause 132 and schedule 7, which are incredibly welcome, provide that the CMA may be required by the Secretary of State to conduct trials of remedies before setting a final remedy package. We recognise that since this is a new regime, the regulator may benefit from such trial remedies, and it is important that the CMA has the legislative teeth and support to do so.

We therefore support the measures in the group. We have not sought to amend them, and we believe that they should stand part of the Bill.

Question put and agreed to.

Clause 129 accordingly ordered to stand part of the Bill.

Clauses 130 and 131 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clause 132 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clauses 133 to 135 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Tenth sitting)

Alex Davies-Jones Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

The final clauses in part 2 concern measures that cut across the Competition and Markets Authority’s competition tools. Clause 136 introduces schedules 8 to 10 to the Bill. The Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 already allow the CMA to impose civil penalties for non-compliance with information requirements. The destruction of documents that have been required to be produced, and the provision of false or misleading information, are criminal offences, but schedule 8 introduces powers for that conduct to be subject to civil penalties. It also reforms existing civil penalties to ensure that the maximum penalties are set at an appropriate level.

Schedule 9 introduces powers enabling civil penalties to be imposed for breaches of competition remedies. Competition remedies are interim measures, commitments and directions under the Competition Act 1998 and interim measures, undertakings or orders under parts 3 and 4 of the Enterprise Act 2002. Schedules 8 and 9 also enable the Secretary of State and Ofcom to impose penalties if they are given false or misleading information in relation to their functions under the relevant regimes. They also give the Secretary of State the power to impose penalties to enforce compliance with remedies accepted or imposed in relation to mergers and markets with public interest considerations. Civil penalties will be applicable unless the party has a reasonable excuse, and that will be assessed case by case.

The maximum penalty for an undertaking or person who owns or controls an enterprise that is not complying with information requirements is 1% of the business’s worldwide turnover. Daily penalties of up to 5% of worldwide daily turnover will also be available in some cases while the non-compliance continues. For breach of remedies, the maximum penalty is set at 5% of worldwide turnover and daily penalties of up to 5% of worldwide daily turnover while the breach continues. The penalties imposed on other persons, who will generally be individuals, are capped at £30,000, or up to £15,000 daily while the breach continues. The CMA is required to produce statements of policy regarding the operation of its penalty powers. In doing so, it must consult the sector regulators and receive approval from the Secretary of State. Schedule 10 amends the legislation that gives the sector regulators their concurrent competition powers, so that they need not unnecessarily duplicate the work that they need to do to prepare statements of policy.

Clause 137 introduces schedule 11, which amends the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 to make express provision regarding the giving of information notices outside the United Kingdom. The schedule enables the CMA to give an information notice to a person who is the subject of a Competition Act 1998 investigation, or a person who is or has been a party to a merger review. The schedule also enables the CMA to give information notices to third parties with a defined UK connection. Compliance will be enforceable through the civil penalty regime. The schedule also amends provisions on methods of serving documents to reflect modern business practices; for example, it allows service of documents via email.

Government amendments 40 to 44 are technical drafting amendments to schedule 12. The schedule, which is introduced by clause 138, applies appropriate parliamentary procedures to new regulation-making powers created by the Bill, and makes other consequential and technical amendments. I commend the amendments to the Committee and hope that the clauses will stand part of the Bill.

[Alex Davies-Jones (Pontypridd) (Lab)]

Labour supports the intention behind the provisions in this grouping. Of course there should be provisions about the attendance of witnesses, as outlined in clause 135. The same can be said about ensuring that the Bill has sufficient legal powers on civil penalties, should the need for them arise in the regime. The provisions in clause 136 and schedules 8 to 10 are adequate, and we support them. The same can be said for clause 137 and schedule 11, which make provisions regarding the service of documents and the extraterrestrial—sorry, extraterritorial; I know we are talking about digital markets, but we have not reached that far yet—application of notices under part 1 of the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002. Of course those laws must work in alignment with the intentions of the Bill. Clause 138, Government amendments 40 to 44 and schedule 12 are all sensible, and part of a rigorous procedure, so we do not oppose them.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

Schedules 8 to 10 agreed to.

Clause 137 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 138 ordered to stand part of the Bill.

Schedule 12

Orders and regulations under CA 1998 and EA 2002

Amendments made: 40, in schedule 12, page 284, line 5, at end insert—

“(1A) In subsection (4) omit ‘, 94A(6)’.”

This amendment removes a reference in section 124(4) of the Enterprise Act 2002 to section 94A(6) of that Act, which is being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 41, in schedule 12, page 284, line 7, at end insert—

“(aa) omit ‘, 94A(3) or (6)’;”.

This amendment removes a reference in section 124(5) of the Enterprise Act 2002 to section 94A(3) and (6) of that Act, which are being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 42, in schedule 12, page 284, line 12, after “section” insert “94AB(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 94AB(9) of the Enterprise Act 2002 (inserted by paragraph 11 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 43, in schedule 12, page 285, line 10, after “section” insert “167B(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 167B(9) of the Enterprise Act 2002 (inserted by paragraph 17 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 44, in schedule 12, page 285, line 23, at end insert—

“(8A) In subsection (10), for ‘174D’ substitute ‘174A(10)’.”—(Paul Scully.)

Paragraph 26 of Schedule 8 to the Bill inserts a new subsection (10) into section 174A of the Enterprise Act 2002 which replaces the existing provision made by section 174D(10) of that Act (which is being repealed by paragraph 28(12) of that Schedule). This amendment amends the Enterprise Act 2002 to replace a reference in section 181(10) of that Act to the latter provision with a reference to the former.

Schedule 12, as amended, agreed to.

Clause 139

Overview

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 59.

Clauses 140 to 142 stand part.

That schedule 13 be the Thirteenth schedule to the Bill.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 201 stand part.

Digital Markets, Competition and Consumers Bill (Seventh sitting)

Alex Davies-Jones Excerpts

Committee stage
Thursday 22nd June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

To create self-sustaining and dynamic competition in UK digital markets, we must address the sources of SMS—strategic market status— firms’ substantial and entrenched power in digital markets. Clause 44 gives the digital markets unit the power to address competition problems in digital markets through pro-competition interventions, which the DMU can make where factors relating to a digital activity undertaken by a SMS firm prevent, restrict or distort competition in that digital activity. That is known as an adverse effect on competition. The concept is already used for market investigations under the Competition and Markets Authority’s existing markets regime. Government amendment 12 is a technical amendment relating to PCI investigations.

Turning to clauses 45 to 54, PCIs are fundamental to the new digital markets regime. They will address the root causes of market power that can lead to one or two large firms dominating, to the detriment of consumers and businesses in the UK. Clause 45 empowers the DMU to open a PCI investigation into suspected competition problems related to designated digital activities.

Clause 46 describes the process relating to PCI investigations. Under clause 47, the DMU will be required to carry out a public consultation on a proposed PCI decision before concluding its investigation and giving notice of final PCI decisions. Clause 48 provides the procedure for the DMU to give notice of its decision when concluding a PCI investigation. When the DMU decides to make a PCI, it must do so within four months of the PCI decision.

Pro-competition orders, set out in clause 49, are the means by which the DMU can require a firm to take, or refrain from taking, specific actions. That includes orders on a trial basis. They are vital in converting the DMU’s PCI decision, from clause 48, into an operationable remedy.

To effectively address the sources of competition problems in digital markets, PCIs should be iterative and targeted, so the DMU will be able to replace pro-competition orders. That is provided for in clause 50, which will allow the DMU to initially apply lighter touch remedies and then assess their effectiveness before introducing stronger measures if necessary.

Clause 51 gives the DMU the power to revoke a pro-competition order where it deems it inappropriate to vary the order through replacement, or where the order has addressed the competition problem and is no longer required. That ensures that PCIs remain effective and proportionate and can respond to changes in the market.

Clause 52 provides that before making or revoking a pro-competition order, the DMU must carry out a public consultation. The DMU will be under both a general and specific duty to monitor and review pro-competition orders provided for in clause 53.

Finally, SMS firms should be able to offer commitments to the DMU to propose a solution to a competition problem. That supports a participative approach to regulation, which is set out in clause 54.

[Alex Davies-Jones (Pontypridd) (Lab)]

We will of course look properly at the issue of consumer protections later in the Bill, and my hon. Friend the Member for Feltham and Heston has a number of contributions to add on that topic.

Clause 44 is important in putting consumer rights at the heart of the Bill, as it enables the CMA to remedy competition problems by making direct interventions. In contrast to conduct requirements, PCIs are interventions by the CMA to remedy an adverse effect on competition by addressing the root causes of an undertaking’s entrenched market power. The CMA will need to take into account the benefits that UK users may get from the factors having an adverse effect on competition.

We note that there is no defined list of PCI remedies, but that they may include behavioural and structural remedies. Will the Minister update us on his assessment of the value of adding a list of potential remedies to the Bill? Some companies we have spoken to feel that that would be helpful to understand just how these interventions will work in practice. However, we believe that the PCI is an exceptionally useful tool and a big advantage over the EU Digital Markets Act, as it will be able to go further than the conduct requirements and address the root causes of entrenched market power.

As it stands, the Bill outlines that the CMA may make a PCI where it considers that a factor or combination of factors relating to a relevant digital activity is having an adverse effect on competition, also known as the AEC test. The AEC test is in line with the legal test in the existing market investigation regime; by contrast, the digital markets taskforce recommended an AECC test—an adverse effect on competition or consumers test—enabling the CMA to address consumer harm without always needing to show that competition has been undermined. Similar to a supplementary duty to have regard for the interests of citizens, that would give the DMU broader scope to intervene beyond its traditional focus on competition. Can the Minister outline exactly why the AEC test was chosen over the AECC test?

Labour supports the intention behind Government amendment 12, which confirms that the CMA will be able to begin a PCI investigation into a designated firm, even when it has previously made a decision not to do so. We see that as integral to the CMA’s powers, and we will support the amendment.

We see clause 45 as fleshing out the legal powers that the CMA will need to draw on in the event of a formal investigation. We welcome clarification that the CMA will form its initial view of the competition problem on the basis of available evidence, such as that arising from complaints submitted by third parties, from the CMA’s market studies or from referrals of information from other regulators. Labour has heard from some tech companies that although pro-competition interventions are viewed as a major advantage of the UK’s regime, companies are concerned about the broader effects they could have on markets, and urge for thorough consultation and for a graduated approach to the potential severity of the intervention. I am therefore keen to hear the Minister’s thoughts about this issue, as it is important for all concerned that we get some clarity.

Clause 46 is an important clause for designated undertakings that may find themselves subject to a PCI investigation. We welcome provisions that ensure the CMA will be under a duty to publish a summary of the PCI notice as soon as it is able to do so. The Minister will not be surprised that we are keen to understand more about that and what it will look like in practice. Where exactly will the summary be published? Will it be made available to others who wish to view it? We welcome subsection (2), because it is important that the CMA has the power to update a PCI investigation notice when it needs to do so. That is outlined in subsection (3), which is an important point to note.

Lastly, clause 46(4) places a duty on the CMA to publish a notice of investigation as soon as practicable. Again, can the Minister confirm whether that will be public? There is a theme in my questions to the Minister about the public transparency of such documents. Naturally, we understand that some information will obviously need to be redacted, but there is plenty of value in improving transparency.

We welcome the principles in clause 47, which we have long called for, because the regime will be effective only if consultation is truly at its heart. However, we have concerns about how the conduct requirements and PCIs will run alongside one another. In the Bill’s current drafting, it is unclear by what metrics the CMA will determine whether a CR or PCI is appropriate, and it will have discretion to choose. We could very well find ourselves in a position whereby the CMA will generally implement a CR first and see whether it is having an impact, before beginning a PCI investigation. If the CMA chooses to focus on CRs initially, it could allow SMS firms to maintain much of their entrenched market power before taking action. To improve the effectiveness of the regime, one potential option that has been raised with us is for the CMA to be required to consider whether a PCI investigation and PCI remedy may be more effective early on, or complementary to a CR, when constructing a CR. I would be grateful if the Minister could give us some thoughts on that and explain whether he will be able to instruct the CMA on which one would be best to carry out first.

Other issues that have been raised with us relate to clarity on a number of points, and I hope the Minister can provide that clarity. First, can PCIs be introduced only after conduct requirements have been imposed, rather than the alternative that is alongside them? Secondly, what is the exact purpose of the revocation process? Does it mean that PCIs cannot be adapted while they are in effect, as indicated in the Government’s consultation process, and that the CMA would have to restart the process—meaning there would be an investigation, a consultation, a decision and then an order—before introducing a new PCI? It feels like that could cause delay and uncertainty in the regime, which could ultimately impact its effectiveness. I look forward to hearing the Minister’s thoughts on those specific points.

Labour sees clause 48 as fairly standard in outlining the procedure for concluding a PCI investigation. It is important that the process is outlined on the face of the Bill, and we welcome confirmation of the length and period of investigation, and of the period in which the CMA has to consult and issue a pro-competition order where required. Those are important timeframes, which Labour supports.

We note clause 48(7), which states:

“As soon as reasonably practicable after giving a notice under subsection (1) or (6), the CMA must publish a copy of the notice.”

Again, that is a key point that I want to prod the Minister on. What is his assessment of

“as soon as reasonably practicable”?

What will that be and who will the CMA be publishing the statement for?

We welcome clause 49, which outlines the way in which pro-competition orders will work in practice. In relation to clause 50, I would be grateful if the Minister could confirm whether the replacement of a PCI as outlined in the clause will require revocation, as set out in clause 51, and a fresh process involving an investigation, consultation, decision and order? Alternatively, will the process be to revise an existing PCI and will that be sped up? We do not want any delay in that happening. That is the point I am trying to make, so will the Minister elaborate on what evidence is needed to justify a revocation of that kind?

I hope the Minister will respond to my points. We support the broad intentions of the remaining clauses in this group and are therefore happy to support their full inclusion in the Bill.

[Paul Scully]

rose—

--- Later in debate ---

[Paul Scully]

These clauses comprise chapter 5, “Mergers”, and schedule 2 provides further detail needed for chapter 5 to function smoothly.

Clause 55 establishes a requirement for SMS firms to report possible mergers involving them that have the potential to harm competition in the UK to the CMA before they can be completed. Unlike most merger regimes, at the moment there is no obligation in the UK to notify mergers to the CMA, but firms may choose to voluntarily notify the CMA of a merger in order to receive a binding decision from the CMA on it. In digital markets, this is a very different thing, because of the speed with which it can happen and the entrenchment of power, which we have discussed at length. That is why it is important that the CMA has the opportunity to review potentially harmful mergers involving SMS firms before it is too late. This light-touch reporting requirement is designed to focus on only those possible SMS firm mergers with the potential to give rise to competition concerns.

The mergers will need to be reported only if three conditions are met, such as when the SMS firms will obtain qualifying status through holding shares or voting rights in a target firm that is a UK-connected body corporate. I will set out further detail on the former when I explain clause 56. The latter means any body corporate that carries on activities in the UK or supplies goods or services to the UK, or which has a subsidiary that does so. The consideration provided by the SMS firm for the holding of shares or voting rights must also be at least £25 million. Similar conditions will also apply for the reporting of possible mergers involving an SMS firm participating in a joint venture. When an SMS firm is part of a larger corporate group, the requirement to report will instead apply to all the bodies corporate that make up the group. In those situations, the question will generally be whether the group as a whole will meet the conditions I have set out. When I say “an SMS firm” in debates on this chapter in part 1 of the Bill, it means an SMS firm or any larger corporate group it is part of.

The reporting process should take a maximum of 10 working days. Once a report has been submitted, the CMA will have up to five working days to determine whether the report is sufficient and must therefore be accepted. Following acceptance, the CMA will have a further five working days to review the information in the report before the possible merger can be completed. If the CMA identifies a reported merger as potentially problematic, it can use its powers under the general merger regime to investigate the merger as it would any other type of merger.

Clause 56 defines qualifying status. Under the merger regime, control over a target firm or joint venture vehicle must be acquired or increased for a merger to take place. That is for the CMA to determine on a case-by-case basis. One of the ways control can be exercised is through a shareholding or through voting rights. In order to capture acquisitions of control over target firms based on shares or voting rights, clause 56 provides that SMS firms will acquire qualifying status in a target firm when the percentage of the shares or voting rights they hold in the firm crosses any of the thresholds in subsection (1)—that is, when the percentage moves from less than 15% to 15% or more; from 25% or less to more than 25%; or from 50% or less to more than 50%. These thresholds have been chosen specifically to capture circumstances in which different levels of control recognised under the merger regime are likely to be acquired by an SMS firm.

Clause 57 sets out what is meant by the “value of consideration”, which is necessary to determine whether a possible merger meets the £25 million threshold for reporting set out in clause 55. Clause 58 places several requirements on the CMA with regard to the notice it is required to make, setting out the parameters of the report that SMS firms will be required to provide to the CMA about a possible merger. The clause requires the CMA—to pre-empt a possible question—to publish online a notice setting out what information must be included in a report and what form a report must take. We decided, in subsection (2), to limit what the CMA may require in the report to only that information considered necessary to decide whether to initiate a merger investigation or make a hold separate order under the general merger regime while an investigation is ongoing.

Clause 59 sets out further detail of when and how reporting requirements will apply. Schedule 2 provides further detail as to when interests like shareholdings and rights, such as voting rights, are treated as held in a target firm or joint venture vehicle for the purposes of the duty to report a possible merger in clause 55. Clause 60 places time limits and procedural requirements on the CMA once it has received a report. Clause 61 makes it clear that a reportable event must not take place until the reporting requirements set out in the chapter are met. Clause 62 clarifies when a possible merger is considered as taking place for the purposes of the reporting requirements. Clause 63 permits SMS firms to authorise third parties to act on their behalf—specifically, to give a report to the CMA about a possible merger and to receive the notice of acceptance or rejection from the CMA. In general, those third parties are likely to be legal representatives.

Clause 64 sets out the review process for non-penalty decisions made by the CMA in connection with the chapter. We will talk about appeals and the wider area later on, but if a person is aggrieved by the decision made by the CMA in connection with a reporting requirement that is not a penalty decision, they can apply to the Competition Appeal Tribunal for a review of that decision. The Competition Appeal Tribunal will apply the same principles as would be applied by a court on an application for judicial review. A full merits appeal process will apply to penalty decisions made by the CMA in connection with this chapter, as it does to penalty decisions under the wider merger regime.

Clause 65 provides the Secretary of State with powers to make regulations in relation to the duty to report. It also sets out which procedure-specific regulations are subject to that. It is appropriate that the Secretary of State has the power to make regulations on the duty to report. Operational experience may reveal that the criteria needs to be changed for the reporting process to continue to function effectively. Clause 66 places a duty on the CMA to monitor and enforce the merger reporting requirements. It goes no further than requiring the CMA to consider exercising its investigative and enforcement powers where it is aware of a basis for doing so.

[Alex Davies-Jones]

I am grateful to the Minister for outlining chapter 5 and we welcome the provisions. None of us want to see potential loopholes or designated undertakings being able to avoid their responsibilities thanks to a merger, so we see clause 55 and many of the clauses that follow in this chapter as being eminently important. More specifically, the clause sets out the circumstances in which designated undertakings or, where designated undertakings are part of a group, group members—see clause 114—will have a duty to report a possible merger involving a reportable event to the CMA before it takes place.

We welcome the clarification that there will be two categories. The first is concerned with designated undertakings or groups reaching certain percentage thresholds of the shares or voting rights held in certain bodies corporate with links to the United Kingdom. The second is concerned with designated undertakings or group members forming certain joint venture vehicles that are intended or expected to have links to the United Kingdom. We recognise the role of a minimum value requirement, which will also apply in relation to the consideration provided for the relevant shares or voting rights, or in relation to the formation of the joint venture vehicle.

We see the clause as important in clarifying where the line will be drawn for possible mergers in relation to this regime, and agree with the drafting, which sets the value of the merger as being at least £25 million. We feel that is a fair value, so we support the clause and have not sought to amend it at this stage. The same can be said for clauses 56 to 59. As we know, one of the strategic recommendations of the Digital Competition Expert Panel’s Furman report suggested that legislation adapting the merger control rules—so that the CMA could more effectively challenge mergers that could be detrimental to consumer welfare—was required. So we see clause 56, which sets out the circumstances in which a designated undertaking or group will have qualifying status in relation to a UK-connected body corporate or joint venture vehicle, as being vital to ensuring that mergers are covered by this legislation more widely.

--- Later in debate ---

[Paul Scully]

Clearly the DMU needs to have access to the correct information to ensure its work is evidence-based. Clause 67 allows the DMU to request information it needs to either exercise, or decide whether to exercise, any of its digital markets functions. That includes information in any form, such as data, internal documents and forecasts. The clause also includes new powers to investigate the outputs of algorithms by requiring SMS firms to generate information and to carry out tests and demonstrations of technical processes.

Clause 68 allows the DMU to require that an SMS firm names a senior manager to be responsible for ensuring that the firm complies with a specific information request. The DMU will be able to impose a penalty on the named senior manager where they have failed, without reasonable excuse, to prevent the SMS firm from failing to comply with the request for information. Personal liability will help to embed a culture of compliance within strategic market status firms.

[Alex Davies-Jones]

Clause 67 is an important starting point as it gives the CMA powers to require the provision of information from designated undertakings and any other person believed to hold material needed for it to operate the regime. That includes any information in any form, which might include data, correspondence, forecasts and estimates.

We welcome the clarity that the CMA will be able to specify the format in which the information must be provided. That is a very important point that we feel will be critical to ensuring timely responses from designated undertakings. We have seen the dangers of what can happen when we allow these big firms to overwhelm with the provision of data in complex formats and in incredible quantities in legal proceedings around online safety, and we do not want to see the same negative consequences here.

We welcome subsection (4), which, importantly, includes provisions that will enable the CMA to compel evidence collection by requiring a person to collect and retain information that it may not otherwise collect and retain. In addition, subsection (7) specifies that the CMA can require the recipient of an information notice to give the CMA information, either in physical or electronic form, which is located outside the UK. That is an important point worth touching on.

We know that these SMS firms have a global reach. We do not want to be in a position whereby the CMA cannot access information just because it is held overseas. This is a sensible and crucial clause to ensure the CMA has the appropriate teeth and power to act when it needs to.

We are also pleased to see clause 68 included in the Bill, which references a point that Labour have repeatedly called for in other legislation. Without these provisions and the ability to name an individual, big companies will typically not take their responsibilities seriously. We therefore welcome confirmation that a penalty may be imposed on a named senior manager of a designated undertaking that fails to comply with an information notice—a point we will address later, when we discuss clause 85.

Ultimately, we feel that the provisions are in line with other regulated sectors, principally financial services, where regulation imposes specific duties on directors and senior management of financial institutions, and those responsible individuals face repercussions if they do not comply.

I feel we have lots to learn here from looking to other regulated industries. For example, in financial services regulation, the Financial Conduct Authority uses a range of personal accountability regimes, including the senior managers and certification regime, which is an overarching framework for all staff in financial services industries. The regime aims to

“encourage a culture of staff at all levels taking personal responsibility for their actions and make sure firms and staff clearly understand and can demonstrate where responsibility lies”.

If only we could have that approach to other legislation on online safety. We therefore support clause 68—we see it as standard—and have not sought to amend it at this stage.

Question put and agreed to.

Clause 67 accordingly ordered to stand part of the Bill.

Clause 68 ordered to stand part of the Bill.

Clause 69

Power of access

[Paul Scully]

I beg to move amendment 13, in clause 69, page 39, line 18, after “access” insert “business”.

This amendment limits the power of the CMA to require access to premises so that it may be used only in relation to business premises.

--- Later in debate ---

[Alex Davies-Jones]

The Opposition believe that clause 69 is crucial to the Government’s policy objective of empowering the Competition and Markets Authority, and ensuring that it can enforce its regime and proactively address the root causes of competition issues in digital markets.

The clause builds on clause 68 and gives the CMA the power to require a designated undertaking to obtain, generate, collect or retain specified information or to conduct a specified demonstration or test of a business system or process under the supervision of the CMA. Specifically, the power can be exercised when the designated undertaking has failed to comply with a previous request for information under an information notice or to provide sufficient assistance to a skilled person. We welcome those provisions. We also welcome the clarity provided by the clause about when the CMA can use the powers, which is when companies have failed to comply with other requirements. None of us wants the CMA to take an overly heavy-handed approach, but it must be compelled and empowered to act where necessary.

We understand that the powers in subsections (2) and (3) will be used rarely, but it is important that they be in the Bill. They are also an important step in ensuring that big strategic market status firms, which for too long have gone unregulated, cannot bypass the regime by concealing information or operating systems. It is vital that the Government do not give in here, so I urge the Minister to ensure that they do not. I imagine that there is heavy pressure from firms that will be captured by the provisions, but the Government must not cave in or weaken this regime; I hope the Minister can reassure us that they will not. That being said, we welcome the clause and have not sought to amend it at this stage.

Government amendments 13 and 14 clarify that the CMA’s access rights will be used only in relation to business premises. We see that as appropriate. Government amendments 15 to 23 are technical changes that we are happy to support. Government amendment 24 is an important clarification that limits duties to inside the UK, which again is a sensible inclusion that Labour supports.

Mr Hollobone, would you like me to discuss clause 70, or finish there?

[The Chair]

We will wait for that treat.

--- Later in debate ---

[Paul Scully]

Clause 69 is a backstop power enabling the Digital Markets Unit to supervise firm-led tests and demonstrations, either at a firm’s premises or remotely. It will be available only in limited cases in which an SMS firm has not complied with an information notice or a duty to assist a skilled person. It provides an efficient way for the DMU to get the information that it needs without placing an undue burden on firms.

Clause 70 allows the DMU to require an interview with any individual in the UK with information relevant to a digital markets investigation. That will enable the DMU to gather vital evidence that is held by individuals with relevant knowledge, rather than in digital or physical forms. Clause 71 protects individuals who are compelled to give testimony under clause 70 from self-incrimination. It limits the circumstances in which the DMU can use an individual’s interview statement as evidence against them in a criminal prosecution. Clause 72 allows the DMU to enter business premises without a warrant for the purposes of a breach investigation. It ensures that the DMU can collect information that is being withheld by an SMS firm that is accessible only on the premises. Without that power, there would be greater risk that a firm could destroy or interfere with material relevant to an investigation.

Clause 73 allows the DMU to enter business and domestic premises for the purposes of a breach investigation, after obtaining a warrant from the High Court, Court of Session or Competition Appeal Tribunal. The DMU must also establish that a firm has failed to comply with previous information requests, or that no other powers would secure the necessary evidence, and establish reasonable suspicion that the information is relevant to the investigation. Clause 74 contains supplementary requirements for how the DMU must exercise its power to enter premises under a warrant. It also clarifies the extraterritorial scope of that power. The DMU will not be able to enter premises outside the United Kingdom under clause 73, but it can access information regardless of where it is physically stored.

Clause 75 allows the DMU to take copies of, or extracts from, information and sift it off site when exercising its power to enter either business or domestic premises under a warrant, if it is unsure whether the information falls within the scope of the investigation. Clause 76 ensures that the DMU follows established judicial procedures when applying for a warrant to enter premises. It requires the DMU to follow the rules of the High Court, Court of Session or Competition Appeal Tribunal; that provides vital checks and balances.

These clauses are largely modelled on the CMA’s existing information-gathering powers, and they will be subject to the same robust safeguards. They also give the DMU new powers to scrutinise the output of algorithms in clause 69, and enhanced powers in clause 73 to access information that is stored on remote servers but accessible over the internet. It is important to recognise that without those powers, the DMU’s interventions would not be well evidenced or enforceable.

[Alex Davies-Jones]

I was champing at the bit to talk about these clauses. However, I will keep my comments brief because much of Labour’s thoughts align with our thoughts on previous clauses.

Clause 70 gives the CMA the power to require any individual to attend an interview and answer questions for the purposes of a digital markets investigation. That is consistent with the amendments to section 26A of the Competition Act 1998. We welcome those, so it is only right that the powers appear in this legislation, too. These are basic powers and the clause is fairly procedural. The CMA must have the power to give notice to any individual with information relevant to a digital markets investigation, requiring them to answer relevant questions at a place or in a manner specified in the notice. That is fundamental for an empowered regulator. We support the approach, so we have not sought to amend the clause at this stage. We also support the intentions of clause 71, and we believe that the approach is fair and reasonable. The clause is important for clarity. We welcome its inclusion in the Bill and we have not sought to amend it at this stage.

Turning to clause 72, it is right and proper that the CMA must have reasonable grounds to suspect that information relevant to the breach investigation can be accessed from or on the premises. We support that common- sense approach. The provisions are in line with those for other regimes, and will be important in ensuring that if the CMA is required take action for the purposes of a breach investigation, it can do so in a timely and effective manner. We support the clause and have not sought to amend it.

We also support the intentions of clause 73, which gives the CMA the power to enter business and domestic premises under a warrant, without notice and using reasonable force, for the purposes of a breach investigation. Again, the CMA has powers of entry under a warrant through sections 28 and 28A of the Competition Act 1998. It will come as no surprise, given that we support provisions for the CMA to act without a warrant, that we agree that it should be able to act with one. We value the clarification that the CMA must prove that there are reasonable grounds to act. If it has to, it can call on individuals who have expertise that is not available in the CMA but is required if the terms of the warrant are to be fully carried out. That will allow the CMA to act rapidly, which, given the level of these breaches, is vital. We therefore support this clause standing part of the Bill.

Clause 74 sets out the supplementary requirements to the CMA’s power to enter premises under a warrant. We welcome the transparency afforded by subsection (1), and the clarification that although the CMA cannot enter premises outside the United Kingdom, as outlined in subsection (6), it can access information regardless of where it is physically stored. That is an important point, given the nature of SMS firms and their global holdings. For those reasons, Labour is happy to support the clause standing part of the Bill.

Clause 75 makes necessary amendments to a range of sections of the Criminal and Justice and Police Act 2001 to enable the CMA to seize information and take copies of, or extracts from, information when exercising its power under clause 73 to enter business and domestic premises with a warrant. It is a practical clause that aligns with the CMA’s power to seize documents from business premises under section 28 of the Competition Act 1998. We therefore believe that the clause should stand part of the Bill.

Clause 76 requires the CMA to follow the rules of the High Court, the Court of Session or the CAT when making an application. We see it as a natural consequential clause and will therefore support it.

[Seema Malhotra]

May I make one additional comment? We received evidence from trading standards about their access to information that could be stored online in order for them to undertake some of their responsibilities. Has any consideration been given to whether the search powers that the CMA will be given could be extended to trading standards, which sometimes undertake very similar areas of work?

Digital Markets, Competition and Consumers Bill (Fifth sitting)

Alex Davies-Jones Excerpts

Committee stage
Tuesday 20th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

It is a pleasure to serve under your chairmanship, Dame Maria, and to address the Committee today. I thank all its members for volunteering to serve on this Committee, and I look forward to our discussions over the coming days and weeks.

Part 1 of the Bill provides for the pro-competition regime for digital markets. This is a targeted regime that will establish new, more effective tools for the Competition and Markets Authority and, in turn, the digital markets unit. That will allow them to proactively drive more dynamic digital markets and prevent harmful practices.

Clause 1 is purely introductory and provides an overview of part 1. I hope that hon. Members agree that this clause will therefore assist readers to navigate this part. I will briefly explain some of the language I will use in this series of debates. First, the Committee will hear me referring to the digital markets unit, or the DMU, which is a new administrative unit of the Competition and Markets Authority—the CMA. While the legal functions of the regulator under part 1 of this Bill remain those of the CMA, in practice it is likely that most of the responsibilities under part 1 will be carried out by staff within the DMU. Therefore, for consistency and ease, I will be referring to the DMU throughout the debates. The exception to that is the merger functions in chapter 5 of part 1, which will generally be carried out by those staff who deal with mergers more broadly.

Secondly, I will use the words “firm” and “undertaking” interchangeably. “Undertaking” is the word used in this part of the Bill and is an economic concept that is already used in the Competition Act 1998. The concept of an undertaking covers any person engaged in economic activity, regardless of its legal status and the way in which it is financed. “Persons” may be corporate bodies, and an undertaking may encompass multiple corporate bodies when they form a single economic unit under competition law. The Government’s view is that an undertaking will often encompass the entirety of the relevant corporate group, but it may sometimes be a smaller subset of the corporate group.

I hope that that helps to clarify the language that the Committee will hear over the coming days.

[Alex Davies-Jones (Pontypridd) (Lab)]

It is a genuine privilege to serve under your chairship, Dame Maria. I look forward to the weeks ahead. I imagine that the debates will be healthy but, in a real rarity for this place, relatively collegiate too. With that in mind, I will keep my comments on this clause brief. We all agree that this is an important that we will not seek to delay. Competition is vital to encourage innovation, and consumers deserve the best possible protections and value. We all want to get this right, and the Minister knows that. I want to say clearly that the Opposition welcome the Bill in principle. However, it will come as no surprise that we have some concerns that the Bill is lacking in some areas and could go further. We will explore those concerns in the hours and weeks ahead, and I look forward to debating the Bill further.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of undertaking

[Alex Davies-Jones (Pontypridd) (Lab)]

I beg to move amendment 55, in clause 2, page 2, line 25, at end insert—

“(5) An SMS investigation in subsection (4) may take account of analysis undertaken by the CMA, on similar issues, that has been the subject of public consultation, within the five years prior to Royal Assent of this Act.”

This amendment and Amendments 56 and 57 ensure that the CMA is able to draw upon analysis and consultations that took place before the passing of this Act.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 56, in clause 13, page 7, line 18, at end insert—

“(3) Consultation on matters relevant to a decision under section 14(1) undertaken before this Act is passed is as effective for the purposes of subsection (1) as consultation undertaken after it is passed, unless the CMA considers that there has been a material change of circumstances.”

See statement for Amendment 55.

Amendment 57, in clause 47, page 26, line 10, at end insert—

“(3) Consultation on matters relevant to a decision under section 14(1) undertaken before this Act is passed is as effective for the purposes of subsection (1) as consultation undertaken after it is passed, unless the CMA considers that there has been a material change of circumstances.”

See statement for Amendment 55.

[Alex Davies-Jones]

With your permission, Dame Maria, I will make some general points about clause 2 before turning to the amendments. Clause 2 gives the CMA the power to designate undertakings, as defined in clause 115, as having strategic market status in respect of a digital activity. Of course, only those undertakings designated with SMS will be subject to the digital markets regime.

The clause is vital in establishing the CMA’s new functions that will allow it to regulate digital markets. We welcome efforts to put the previously established digital markets unit on a statutory footing, and we see it as a key step in establishing the CMA’s responsibility for overseeing digital businesses of a certain size and status operating in the UK. As colleagues will note, this part of the Bill is seen by many as the UK’s version of the EU Digital Markets Act as it has many similarities to it. For an undertaking to be designated as having SMS, the following conditions need to be met: the undertaking carries out a digital activity, which means either providing an internet service or digital content; that digital activity is linked to the UK; and the undertaking must have substantial and entrenched market power. The latter condition requires the CMA to look five years ahead and imagine future developments. The undertaking must also have a position of strategic significance in that it generates £25 billion in global turnover or £1 billion turnover in the UK.

We see those as sensible barometers for SMS status, but I want to take this brief opportunity to press the Minister further on the CMA’s ability to look to the future. He will know—and, I am sure, agree—that the sectors we seek to regulate are often incredibly fast moving. We will debate this further shortly in clause 5, but I would be grateful for the Minister’s thoughts on this particular point, especially around his assessment of the CMA’s capacity and ability to essentially predict how changes across industries will emerge.

Amendments 55 to 57 would ensure that the CMA would be able to draw on analysis and consultations that took place before the passing of this Act. The amendments are critical to ensuring that the CMA is able to draw on the work that it did in shadow form once the Bill lands on the statute books. We cannot risk further delay to implementing this regime when we already know that the lack of competition regulation is having a significant impact on both consumers and businesses.

Last week we heard evidence from Professor Myers, who is a visiting professor in practice at the London School of Economics and Political Science. He had some interesting comments to make on the timeline for the Bill so far which I feel are worth reiterating here. Professor Myers said that

“this legislation has taken a while to come to fruition. At one point the UK looked like it was going to legislate before the European Union, but the CMA has done a lot of preparatory work, and I am sure that it recognises that it needs to hit the ground running as soon as this legislation is passed.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 46, Q72.]

That is why the amendments are so important, because they would allow the CMA to reflect on the lessons learned in the various consultations and analysis that it has already undertaken. I hope the Minister can see that these simple amendments would make sense for all involved.

[The Chair]

Before we proceed, I note that the shadow Minister has efficiently covered clause 2 stand part, so perhaps the Minister could also do so in his response, in the interests of time.

[Jerome Mayhew]

It is a pleasure to serve under your chairmanship, Dame Maria. I will deal first with whether clause 2 should stand part of the Bill. It is of course axiomatic. Right at the heart of the purpose of the Bill is the designation of undertaking. Importantly, it references clause 7, which deals with the turnover of an undertaking. I am looking forward to what the Minister has to say about clause 7, particularly with reference to the levels of revenue or turnover for an undertaking. The Minister has given definitions for “undertaking” and “firm”. I look forward to his further comments about those definitions, particularly when it comes to the classification of worldwide turnover and the revenue being undertaken within the United Kingdom. I am straying slightly into clause 7, but because there is reference to it in clause 2, I hope that is acceptable.

I am just flagging that there may be consideration under clause 7 as to the possibility of the manipulation of turnover where there is a global undertaking with global turnover of less than £25 billion, but where the turnover associated with the United Kingdom is approaching the £1 billion mark. It is foreseeable that we could start to have economically significant manipulation associated with the definition of turnover—I flag that because it is referred to in clause 2. Of course, the main body of clause 2 is right at the heart of the Bill. I welcome the constructive opening comments from the hon. Member for Pontypridd, and I look forward to engaging with her and the other Members of the Committee on that basis over the coming days and, I am afraid to say, probably weeks. [Laughter.]

I turn to amendment 55. This Bill is already hundreds of pages long, and it was often noted in my former career at the Bar that legislation gets longer and longer as it seeks to become more and more specific. However, there is a risk with seeking to list all the elements that we wish to cover. By having a list, we encourage exemptions and the seeking out of elements that are not quite on the list. Through that mechanism, undertakings can avoid the intention while complying with the letter. In my submission, the approach taken by the Government in the current drafting of clause 2 is the right one, because, as the Minister has already mentioned, it gives the DMU the wide scope it needs to take account of work that has already been done without constraining it by having a specific list, as amendment 55 would require. Proposed subsection (5), which the amendment would insert, says that an SMS investigation

“may take account of analysis undertaken by the CMA, on similar issues, that has been the subject of public consultation, within the five years prior to Royal Assent of this Act.”

Who could object to that? However, the Minister made the point that it is already encompassed within the powers of the DMU under the current drafting of the Bill. If we say that this is specifically included in the body of text, it prompts the question: what if someone is just outside that but would otherwise properly be within the consideration of the DMU? It raises arguments that will be explored via litigation, particularly by organisations that have substantial turnover and considerable economic interests to defend, as we heard in oral evidence over the past week.

The last thing we want is to have legislation that invites clarification by the courts. Although I and the Minister are very sympathetic to the intentions behind amendment 55, I fear that it might have the unintended consequence of increasing the chances of prolonged litigation as we seek to explore what exactly is and is not within scope of the DMU. For that reason, I do not support the amendment.

[Alex Davies-Jones]

I welcome the comments from the hon. Gentleman and the Minister, but we would like to press the amendment.

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[The Chair]

With this it will be convenient to discuss clauses 4 to 8 stand part.

[Alex Davies-Jones]

We do not oppose clauses 3 to 8, on the basis that they set out what constitutes a digital activity for the purpose of part 1 of the Bill. Clause 3 is an important clause with a number of subsections that clarify the exact definitions of digital activities and provision of services. These are all critical to empowering the DMU, which, if properly supported, has the potential to be a world-leading regulator and is ultimately the critical first step in modernising our competition policy.

We can all agree that the UK has the potential to be recognised as a global leader in technology and innovation, and capitalising on that is vital to our economic growth, yet the current situation, which sees a small number of firms dominate digital markets, is reducing competition for other businesses. Ultimately, it is consumers who are paying the price in the products and services we all receive.

This clause is crucial to defining exactly which digital activity will fall under the regulation, and it is welcome. After all, Labour has been clear and has long called for measures to regulate the digital space more widely. We specifically support the clause, as it gives us all clarity on how we can define digital activity.

Subsection (3), which outlines how the regime will give the CMA the power to treat multiple digital activities carried out by a single undertaking as a single digital activity, is particularly welcome. For different activities to be grouped together, they must either have substantially the same or similar purposes—for example, a social media provider offering a number of internet services under different brands with a common function, allowing users, such as advertisers and publishers, to interact and communicate with each other; or can be carried out together to fulfil a specific purpose—for example, services and products that are part of the same supply chain, such as services selling advertisements and the provision of an advertising platform. We all know the rapid rate at which companies can develop and expand, so it is particularly welcome to see this subsection.

Subsection (4), which sets out that where the CMA is required to give or publish a notice or other document under part 1 of the Bill, it may describe the digital activity by reference to the nature of that activity, brand names, or a combination of these, is also vital to the success of the regime. We clearly support the clause, which we regard as crucial to establishing the barometers of the CMA’s regulatory powers, and we have therefore not sought to amend it at this stage.

Clause 4 sets out the ways in which a digital activity could be linked to the UK for the purposes of designation. We are pleased to see that the clause considers the number of UK users in its criteria, as we have all read the reports of tech firms threatening to leave the UK if other legislation places requirements on them in future. That is why, with regard to pro-competition law, the UK user base must be considered when it comes to implementing this regime.

Once on the statute book, the DMU will be empowered to oversee a new regulatory regime for the most powerful digital firms, promoting greater competition and innovation in these markets and protecting consumers and businesses from unfair practices. It is vital that UK-specific connections are established in the Bill. The clause is also an important opportunity to highlight the significant impact that inaction is having on our digital markets in the UK. As we know, these markets are characterised by having just a few big tech firms with entrenched market power and the ability to shape the market to the detriment of consumers and smaller businesses. The 2020 CMA market study said:

“Both Google and Facebook grew by offering better products than their rivals. However, they are now protected by such strong incumbency advantages—including network effects, economies of scale and unmatchable access to user data—that potential rivals can no longer compete on equal terms.”

The current balance of power means the big tech companies often have an unfair advantage over their competitors and dominate key markets. For example, virtually all UK smartphones run either Apple or Google operating systems. In 2018, Google had a more than 90% share of the UK search advertising market, and Meta owns 50% of the UK’s digital display advertising space. Thanks to their dominance, Apple and Google made in excess of £4 billion of profits from their mobile businesses in 2021. The CMA estimates that Facebook and Google made profits of £2.4 billion above what would be considered a fair return in the digital advertising market in 2018. On Meta’s market dominance, the CMA noted:

“Facebook’s average revenue per user in the UK has increased from less than £5 in 2011 to over £50 in 2019.”

The consequence is worse outcomes for smaller businesses and consumers. That is why we welcome the clarity in the clause and support its inclusion.

Clause 5 requires the CMA to look at the next five years when assessing whether an undertaking has substantial and entrenched market power in respect of a digital activity. Specifically, it must be satisfied that the undertaking’s market power and influence in the digital activity is neither small nor transient. Although we welcome that requirement—ultimately, none of us wants companies to be stifled to their detriment—I hope the Minister will flesh out exactly how he thinks the clause will work in practice. The CMA is clearly well placed to assess digital firms’ plans for progression and development over the next five years, but we are concerned that the clause is broadly asking the impossible, given the rate at which technological developments and expansion can occur in this space. I would therefore welcome the Minister’s assessment.

The clause further outlines that the CMA must take into account expected or foreseeable developments if it does not designate the undertaking as having strategic market status in respect of the digital activity to which the investigation relates. Again, that is the kind of welcome and balanced approach to designation that we would expect of a new regulatory regime, but will the Minister confirm how the Bill will ensure that such decisions and designations are made public so that the transparency of the regime as a whole is enhanced? It would be helpful for all of us—parliamentarians, firms, civil society bodies and stakeholders in the sector—to understand how designations are made, and transparency is central to that. I hope the Minister will address those points. We seek some assurances, but I am sure we will be happy to support the clause as it stands.

Clause 6 sets out the terms by which an undertaking has a position of strategic significance. It sets out a number of conditions, including size, scale and the role the firm plays in terms of digital activity more widely. We support the need for flexibility in the regime, so paragraphs (c) and (d) are particularly welcome. Paragraph (c) is intended to cover circumstances in which the undertaking can use its position in the digital activity to leverage or expand into a range of other activities. That is vital, because companies have to be agile to dominate a variety of markets, and they can abuse that. Paragraph (d), which is intended to cover scenarios where an undertaking’s position enables it to determine or substantially influence how other undertakings operate—in other words, to set the rules of the game—is equally important.

It would, however, be remiss of me not to highlight our slight concerns about subsection (2), which gives the Secretary of State the power to vary the conditions set out in the Bill. The success of the regime relies on scrutiny and direction from the Government, but will the Minister clarify exactly what type of scenario would require the Secretary of State of the day to vary the conditions?

As I have said, we support an agile approach to regulation. After all, even across other jurisdictions, the idea of regulation and encouraging pro-competition across our digital markets is a complex process for legislation. We wholeheartedly support the need to get this Bill on the statute book—it is something Labour has long called for—but none of us wants the regulator to be undermined or constrained by the opinions of the Secretary of State of the day, so I would appreciate some reassurance from the Minister on that point before proceeding.

Clause 7 outlines the turnover conditions that must be met for the CMA to designate an undertaking as having strategic market status in respect of a digital activity. Subsection (2) sets out that the turnover condition is met if the CMA reasonably estimates that the undertaking’s UK turnover in the relevant period exceeds £1 billion or that its global turnover in the relevant period exceeds £25 billion. We welcome the clarity that only one of these thresholds needs to be met for the turnover condition to be met and, if the undertaking is part of a group, the turnover of that pooled group should be considered, which is a matter we will come to when we debate clause 114.

I will take this opportunity to highlight the fact that while the £1 billion and £25 billion turnover figures may seem high, they show the sheer market dominance that certain firms have over our digital markets. Setting the conditions at the current rate will not act as a deterrent for growth, which, of course, none of us want to see. We particularly welcome subsection (5), which requires the CMA to keep the thresholds under review and, from time to time, to advise the Secretary of State as to whether they are still appropriate and proportionate.

It would be helpful for all of us in the room and those listening elsewhere to understand how the Minister envisions that this will work in practice. Will it be on an annual review basis, and when will we have clarity on that? Will the reviews be made public to ensure proper and appropriate scrutiny? These are small points, but given the lack of transparency around the regime as it stands, I would be grateful for the Minister’s assurances. Despite that, again, we support the clause as it stands and do not seek to amend it at this stage.

Finally—thank you for your indulgence, Dame Maria—clause 8 makes provision about the value of an undertaking’s or a group’s UK or global turnover in the relevant period for the purposes of the turnover condition. We see this as a fairly procedural clause, which outlines the definition of global turnover by which the CMA will make its decisions on designation. We note that subsection (4) gives the Secretary of State the power to make regulations providing further detail about how the total value of an undertaking’s or a group’s UK turnover or global turnover is to be estimated for the purposes of the turnover condition. Again, we feel that this could be problematic, and I would welcome the Minister’s reasoning as to why and in what instance the Secretary of State would need to make regulations to provide that further detail.

If the CMA is to be trusted to make reasonable decisions on a group’s turnover for the purposes of the turnover condition, it seems odd to give the Secretary of State the power to provide further detail when the merits or even the content of such further detail is so ambiguous. I hope the Minister can provide clarity and expand on that point. That aside, we support the clause because the turnover point is crucial for designation. The clause should remain and it should stand part of the Bill.

[Jerome Mayhew]

I briefly made mention of clause 7 in my earlier remarks. I am interested in the Minister’s view, particularly on clause 7(2)(b) and the definition of UK-related turnover being £1 billion or more. There is a legitimate question to be asked, because while that is a substantial amount of money, it is not that great in terms of global business. As I mentioned, I could foresee a situation whereby when a global undertaking’s global turnover is substantially less than £25 billion and its UK-related turnover is approaching the billion-pound mark, there might be a perverse incentive to direct investment and activity away from the United Kingdom because of that cliff-edge definition. I would love to propose a better alternative—it is above my pay grade—but I highlight that as being an issue we might need to take into account.

--- Later in debate ---

[Paul Scully]

Clause 9 relates to initial SMS investigations. It sets out the circumstances under which the DMU can start an initial SMS investigation. An initial SMS investigation is for circumstances in which a firm either is not designated at all or is designated but in a different digital activity. The DMU can open an investigation only if it has reasonable grounds for considering that the tests for designation may be met—that is to say, most importantly, the tests of substantial and entrenched market power and a position of strategic significance in respect of a digital activity. Clause 9 does not require the DMU to open an investigation as it should be able to prioritise investigations to ensure its resources are targeted at the most pressing competition issues.

Clause 10 relates to further SMS investigations—the other type of SMS investigation. A further investigation is an investigation into whether to revoke an existing designation or designate a firm again in respect of the same digital activity. A further SMS investigation may also look at whether to designate a firm in respect of a similar or connected digital activity. The investigation will consider whether to make provision about existing obligations, which I will say more about on clause 17.

It is important that a designation should not continue indefinitely. That is why the DMU must review any designation before the end of the five-year designation period. The DMU will need to open a further SMS investigation at least nine months before the end of the five-year designation period if it has not already done so. It will either revoke a designation, if the firm no longer meets the criteria, or decide to designate the firm again for another five-year period. The DMU will be able to open a further investigation at any point during an existing designation. For instance, if the DMU considers that a firm no longer has substantial and entrenched market power in the digital activity, then it is important that the designation can be reviewed and, if necessary, revoked early.

Clause 11 sets out the procedure that the DMU must follow for either an initial or a further SMS investigation. To ensure that the regime is fair and transparent, the DMU will be required to give the firm a notice when it starts an investigation, stating the purpose and scope of the investigation as well as its length. For initial SMS investigations, the notice must set out the DMU’s reasonable grounds for considering that the designation tests may be met. The DMU must also publish a statement summarising the notice in order to make the wider public aware that it is opening an investigation. That notice will trigger the start of the investigation period.

Clause 12 sets out that the DMU may close an initial SMS investigation at any point before reaching a final decision on designation. It is important that that option is available to the DMU for initial investigations as there may be situations where flexibility is needed. For instance, unexpected circumstances may arise while an investigation is ongoing. The Government believe that in order to reprioritise resources if needed, the DMU should have the discretion to close an initial SMS investigation before reaching a final decision.

Clause 13 sets out that the DMU must consult on its proposed decisions as part of an SMS investigation. It is important that the firm under investigation, as well as all relevant parties, has an opportunity to feed in views and perspectives to the DMU’s investigation process. That consultation is also important in providing for a transparent regime that builds on the best evidence available.

Clause 14 sets out what the DMU must do at the end of an SMS investigation. For a further SMS investigation, the DMU must decide whether the existing designation should be revoked or whether the firm should continue to be designated in the same activity. The DMU must also decide whether to make provision in relation to existing obligations. If relevant, the DMU must decide whether the firm should be designated in a similar or connected activity.

For an initial investigation, the DMU should also reach a decision when it has not closed the investigation early under clause 12. The DMU will need to give the firm a notice of its decision on or before the last day of the investigation period, which lasts up to nine months. It must also publish a summary statement. If for some reason the DMU does not give the decision notice to the firm by the deadline, by default the firm is not designated, or is no longer designated, in the relevant digital activity.

Clause 15 sets out the requirements for decision notices when the DMU decides to designate a firm as having SMS in respect of a digital activity. The decision notice needs to be given to the firm. Among other things, the notice should include a description of the firm, a description of the digital activity, any provision made regarding existing obligations, per clause 17, and the DMU’s reasons for its decisions.

Clause 16 sets out the requirements for decision notices when the DMU decides to revoke an existing designation following a further investigation. A designation will no longer be appropriate once a competitive environment has developed. The decision notice needs to be given to the firm, as set out in clause 14(2).

Clause 17 gives the DMU the power to apply transitional arrangements to obligations revoked as a result of the DMU’s ending an SMS firm’s designation in relation to a digital activity, but only for the purpose of managing impacts of the revocation on persons who benefited from those obligations, and only in a way that appears to the DMU to be fair and reasonable. That will help ensure a smooth transition for wider market participants.

Clause 17 also allows the DMU to continue to apply existing obligations, such as conduct requirements or pro-competition orders. That is for cases where the new designation is in respect of the same digital activity, or an activity that is similar or connected to the previous designated digital activity. The clause will ensure that existing obligations do not automatically end where they still remain appropriate following a further SMS designation. The power to continue to apply obligations will be subject to the DMU’s ongoing duty to monitor and review obligations, which means that the DMU cannot continue to apply obligations that are no longer appropriate.

Finally, clause 18 sets out that a firm will be designated as having SMS in respect of a digital activity for five years, beginning with the day after the day on which the SMS decision notice is given. We believe that five years strikes the right balance between giving enough time for the regulatory interventions to have an impact on the one hand, and making sure the obligations on the firm do not last longer than necessary on the other.

[Alex Davies-Jones]

Labour broadly welcomes this grouping. I will make some brief comments about clauses 9, 10 and 11 before addressing my amendments, and will then come on to clauses 12 to 18.

As we know, and as the Minister has outlined, clause 9 concerns initial SMS investigations. We see the clause as an important start point that will allow the CMA to have clarity over exactly how it will begin the designation process for the regulatory regime. Subsection (1) sets out that the CMA may begin an initial SMS investigation where it has reasonable grounds to consider that it may be able to designate an undertaking in accordance with clause 2. We believe that that is vital and that the CMA is given the statutory powers to investigate fully. We agree that “reasonable grounds” are an important way to capture the beginnings of the process.

It is clear that the regime will apply only to firms with significant market dominance, as we have already discussed, but it is right that the CMA should use a logical approach to establish SMS firms from the outset. We also agree that it is right that where the CMA considers that the digital activity is similar or connected to a digital activity in respect of which the undertaking is already designated, it may instead begin a further SMS investigation.

Similarly, we agree with the wording of subsection (3), which clarifies that the CMA has the power to open a designation investigation in respect of a digital activity even if it has previously decided not to designate the undertaking as having SMS in respect of that digital activity. That would include circumstances where a previous designation had ended or where a previous decision had been taken not to designate the undertaking in respect of that digital activity. It is incredibly important that the CMA should not be restricted in terms of its designations, so this clarity is welcome.

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[The Chair]

Order. I ask the hon. Lady to restrict her comments to the stand part debate on clauses 10 to 18. We debate the amendments a little later.

[Alex Davies-Jones]

Yes, Dame Maria.

I turn to clause 11. We see the clause as important in establishing exactly how the CMA should carry out an SMS investigation. It is important for all involved—from the CMA to regulated firms—that there should be some transparency over exactly how the CMA will begin an SMS investigation, and under what circumstances. We particularly welcome provisions for investigation notices; it is important that all parties are given adequate time and notice in order for this regime to fully succeed.

As I have already noted, we particularly welcome subsection (5), which sets out that as soon as reasonably practicable after giving an SMS investigation notice, or a revised version of the notice, the CMA must publish a statement summarising the contents of the notice and give a copy of the statement to the Financial Conduct Authority, the Office of Communications, the Information Commissioner, the Bank of England and the Prudential Regulation Authority. That is an important point for transparency—a common theme, I am afraid, to which I will continue to return as the Bill progresses through Committee.

As we all know, there are certain aspects of digital markets that make them prone to creating tipping points, where very large online platforms have huge and entrenched market power. The lack of transparency is a particularly problematic issue, and one that the Bill must seek to address. For example, in online advertising a complicated bidding process may take place very quickly—advertisers may not able to scrutinise decisions about where their ads are placed and how much they cost. That has a knock-on impact by exacerbating other competition problems, as people and businesses are unable to make informed choices.

We see the transparency and publication of these investigation notices as an important part of the package around getting the regime right. We welcome the fact that the Financial Conduct Authority, Ofcom, the Information Commissioner, the Bank of England and the Prudential Regulation Authority will all have sight of such notices, but what assessment has the Minister made of making these notices public? Of course, Labour recognises that there is a difficult line to toe here in terms of publishing information that could impact markets and potentially cause detriment to companies’ market share or worth. However, could a sensible middle ground be reached?

I move on to clause 12. Labour welcomes clause 12, which outlines the circumstances in which an initial SMS investigation may be closed without a decision. We recognise that giving the CMA that flexibility is important. None of us wants undue time limits to be placed on its decision-making and designation process. Central to the success of the regime is that the CMA should be empowered to take decisions within its remit. We all recognise that the CMA is a proactive regulator that currently seeks to use its soft power alongside its formal powers, but it is currently being hampered by its existing legal powers. That is causing a disparity between its ability to enforce competition and consumer law—a significant issue that stakeholders, including Which?, Citizens Advice and others, have repeatedly raised, including during our evidence sessions.

We see clause 12 as an important clause that gives the CMA the ability to work in an agile manner, according to workload and priorities. As with previous clauses, we particularly welcome subsections (2) to (4), which set out that if the CMA decides to close an initial SMS investigation, it must give the undertaking under investigation notice of the closure, including the reasons, and publish a statement summarising the contents of the notice. Labour supports the clause, and we have not sought to amend it at this stage.

Clause 13 requires the CMA to consult on any decision that it is considering making as a result of an SMS investigation. Subsection (1) requires the CMA to carry out a public consultation and bring it to the attention of such persons as it considers appropriate. Of course, there is a balance to strike here: public consultation is an important part of any regulatory regime, but none of us wants to see the CMA bound by delays and, as a consequence, unable to regulate effectively. I would be grateful for some clarity from the Minister on his understanding of the “appropriate” person, as outlined in subsection (1), which reads:

“The CMA must—

(a) carry out a public consultation on any decision that it is considering making as a result of an SMS investigation (see section 14(1)), and

(b) bring the public consultation to the attention of such persons as it considers appropriate.”

I imagine the Secretary of State will be one such person, but will the Minister clarify who else he envisions will be privy to the public consultations? In addition, I would be grateful if the Minister again confirmed whether the public consultations will be published. Consultation is an important part of any regulatory regime, particularly this one, which aims to do a colossal thing in regulating our digital markets and, ultimately, to encourage competition. Labour recognises the extent of the challenge, and there is a fine balance to be struck between consultation and stifling action. We do not want to see consultations get in the way of the regime more widely. We have had enough delay as it is, and I am sure the Minister will not mind my highlighting just how many consultations the Bill has endured on its journey so far.

In 2018, the Government established a digital competition expert panel to examine competition in digital markets. In 2021, the DMU was set up within the CMA to oversee competition in the digital markets sector. Between July and October of that year, the Government ran a consultation on plans for a new regime. Almost a year on, in May 2022, the Government responded to the consultation, setting out the final position on a new regime. There has already been significant delay to getting the Bill to this stage, and we already know from its impact assessment that the regime is unlikely to be fully operational until 2025, so I would be grateful if the Minister could reassure us all that the CMA will not be delayed by consultations, as the Government seemingly have been. That point aside, we understand the value of the clause and will support it.

Clause 14 sets out what the CMA must do at the end of an SMS investigation. It broadly clarifies the actions and decisions that the CMA must take in deciding whether an undertaking will be designated as SMS in respect of its digital activity. Again, we welcome subsection (2). We also support subsection (5), which sets out that the CMA must publish a statement summarising its contents as soon as reasonably practicable after giving an SMS decision notice. This is an important clause, which we see as a practical outline of how the CMA will be empowered to act on concluding its initial SMS investigations.

Clause 15 sets out a requirement for SMS decision notices where the CMA decides to designate an undertaking as having SMS in respect of a digital activity. We welcome the clarity afforded in subsection (2), which outlines on the face of the Bill the exact contents that the SMS decision notice must include. This ranges from a description of the designated undertaking to a statement outlining the designation period and the circumstances in which the designation could be extended.

It is also worth referring specifically to subsection (4), which clarifies that giving a revised SMS decision notice to provide for the designation of an undertaking does not change the day on which the designation period in relation to that designation begins. That is a welcome clarification, which I know will be useful for undertakings and civil society to understand as we seek to establish the regime in full.

Although Labour supports the clause, I am interested to know the Minister’s thoughts on subsection (5), which states:

“As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must publish a statement summarising the contents of the revised notice.”

Again, that is rather vague, so will the Minister clarify what he considers to be “reasonably practicable”? Ultimately, companies and consumers alike would benefit from a timely and transparent approach to the regulation. Although I am reassured by the CMA’s ability, we and many others have slight concerns about its capacity and resource, as I have previously outlined, so I would be grateful for the Minister’s assurances on that issue.

Clause 16 sets out the requirements for SMS decision notices where the CMA decides to revoke an existing designation as a result of a further SMS investigation. There is no need for me to repeat myself. We support the clause, and it is important for the CMA to be empowered to act flexibly, particularly given the ever-changing nature of digital markets. Again, we welcome clarification that the CMA will provide for the revocation to have effect from an earlier date—for example, where the undertaking has already ceased to engage in the relevant digital activity. None of us wants to see overregulation, so we support the clause and have not sought to amend it. While I am all for a collegiate approach to legislating, I assure the Minister and my Whip that we do not agree with the Bill in full, as can be seen from the amendment paper. However, on the points covering designation, we welcome the progress and clarity of the clauses, which we see as fundamental to the regime’s wider success.

Labour supports clause 17, which aims to define the nature of an existing obligation, which is any conduct requirement, enforcement order, final offer order or pro-competition order applying when a designation is revoked or another one is made after a further SMS investigation. We particularly welcome subsections (3) and (4), which set out that the CMA may apply any existing obligation in respect of a new designation, may modify that obligation in respect of a new designated activity, and may make transitional, transitory or saving provision in respect of that obligation. Again, we see that as standard procedure to allow the regime to operate in full and have not sought to amend the clause.

Finally—colleagues will be pleased to hear that—clause 18 establishes that where the CMA decides to designate an undertaking as having SMS in a digital activity, the designation period is five years, beginning the day after the day on which the SMS decision notice is given. We welcome other provisions later in the Bill on the circumstances in which the designation period may be extended or revoked. Labour recognises that assessing the regulatory regime in digital markets will take some time, so we believe a designation period of five years is a sensible approach. Given certain undertakings’ market dominance, we think five years is a reasonable timeframe to allow pro-competition mechanisms to take effect and consumers to see that reflected in the options and prices afforded to them. We therefore support the clause and have not sought to amend it.

[Paul Scully]

On the two questions of what is reasonably practical and practicable in terms of time, we do not want to set an artificial deadline but want to make sure that the DMU can act as quickly as possible. As the hon. Member for Pontypridd rightly says, and we have said all the way through, technology and digital markets move really quickly. That is why we want to make sure that decisions are out of the door as quickly as possible, so that people can see what is happening as soon as possible. The decisions will go to the appropriate persons as described, which are relevant third parties and the SMS firms themselves. It is for the CMA to determine who is a relevant third party, but that will clearly include any challenger tech companies that may be affected by the initial SMS designation.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10 ordered to stand part of the Bill.

[Alex Davies-Jones]

I beg to move amendment 46, in clause 11, page 6, line 36, at end insert—

‘(6) The CMA must provide a copy of the SMS investigation notice to any person who requests a copy.’

This amendment and Amendments 47 to 52 aim to ensure access to information relevant to the regime is available publicly.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 47, in clause 12, page 7, line 9, at end insert—

‘(5) The CMA must provide a copy of the notice under subsection (2) to any person who requests a copy.’

See the statement for Amendment 46.

Amendment 48, in clause 14, page 7, line 36, at end insert—

‘(5A) The CMA must provide a copy of the SMS decision notice to any person who requests a copy.’

See the statement for Amendment 46.

Amendment 49 in clause 26, page 14, line 19, at end insert—

‘(3A) The CMA must provide a copy of the SMS decision notice to any person who requests a copy.’

See the statement for Amendment 46.

Amendment 50 in clause 28, page 15, line 20, at end insert—

‘(5) The CMA must provide a copy of the notice to any person who requests a copy.’

See the statement for Amendment 46.

Amendment 51 in clause 30, page 16, line 13, at end insert—

‘(4A) The CMA must provide a copy of the notice to any person who requests a copy.’

See the statement for Amendment 46.

Amendment 52 in clause 46, page 25, line 38, at end insert—

‘(5) The CMA must provide a copy of the PCI investigation notice to any person who requests a copy.’

See the statement for Amendment 46.

[Alex Davies-Jones]

These important amendments to clause 11 that we have tabled are designed to encourage a more transparent approach to SMS investigations. As repeatedly stated, transparency, openness and accountability have to be central to the Bill working in practice and in reality. The Minister will note that this is a simple set of amendments, which will broaden the regime’s openness. Labour firmly believes that a transparent approach where possible and where the impact on markets is limited will be vital to its success. Will the Minister share his thoughts on our amendments? They seek to make the Bill more transparent for everyone and I look forward to some clarity.

[Paul Scully]

Amendments 46 to 52 would require that the notices the DMU must provide to an SMS firm in respect of an SMS designation, conduct requirements and PCIs should be made available on request to third parties. We agree with the hon. Member for Pontypridd that transparency and accountability are essential to the new regime, and we will always look for ways to make sure that it is open and at the core of what we do.

The Bill already provides that the DMU will be required to publish online a statement summarising the contents of those notices whenever they are provided to a firm. That is, it will need to set out required elements of the notice, such as describing its decisions and the reasoning behind them, in a shortened form. In the statements, the DMU will provide the key information from the notice about its decisions to other businesses, consumers and the wider public, in line with public law principles. The DMU may redact commercially sensitive information.

For example, the summary notice for a conduct investigation must give details about the conduct requirement and the behaviour suspected of breaching that requirement, and it must provide information about the investigation period and the timeframe for making representations for third parties.

--- Later in debate ---

[Paul Scully]

Third parties can clearly get involved and approach the DMU, which I will cover in a minute, so we do not necessarily need to get to court stage. I have talked about some of the specifics that will be in the summary notices, which will have quite a considerable amount of detail anyway. We do not want to add extra resource requirements that take away from the core tasks of the DMU.

The summary statements are just one of the ways in which the DMU will inform and involve stakeholders in its decision making. The DMU will be required to publicly consult before making major decisions, which include designating a firm with strategic market status in a digital activity, making pro-competition orders, and imposing conduct requirements. It will also be required to publish guidance on how it will take those decisions.

Should a third party be unsatisfied with the DMU’s summary statement, they can request the full notice through a freedom of information request. As a public authority, the CMA is required under the Freedom of Information Act 2000 to provide the public with information it holds when requested to do so, subject to the relevant exemptions, which include a requirement to protect commercially sensitive information. We agree that public transparency for the new digital markets regime is vital. The drafting ensures that the right information will be made publicly available. I hope I have set out our position to hon. Members and that they feel able to withdraw their amendments.

[Alex Davies-Jones]

I have listened to the Minister carefully outline the Government’s position. I do recognise that a balance needs to be struck, yet we feel that our amendments would seek to increase transparency, openness and accountability. For that reason, we will press them to a vote.

Question put, That the amendment be made.

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Power to impose conduct requirements

[Alex Davies-Jones]

I beg to move amendment 54, in clause 19, page 11, line 17, after “CMA,” insert—

“(ab) where the designated undertaking has been given an SMS decision notice under section 14(2), must come into force no later than three months of the SMS decision notice being given”.

This amendment introduces a timeline for the enforcement of conduct requirements set out on the face of the Bill and in CMA Guidance.

With your permission, Dame Maria, I will also speak to clause 19, in the interests of efficiency.

[The Chair]

indicated assent.

[Alex Davies-Jones]

Clause 19, which outlines the CMA’s power to impose conduct requirements on a designated firm, is very welcome indeed. It is an important clause that aims to prevent harm that may result from the market position of undertakings with strategic market status.

In practice, these conduct requirements are essentially instructions given to a designated undertaking to conduct digital activities in a manner that promotes competition. The requirements can be prescriptive or prohibitive in nature; they are essentially the dos and don’ts, except that the requirements do not apply automatically to every undertaking having SMS and instead apply on a case-by-case basis. The DMU therefore has wide discretion to impose conduct requirements on specific SMS firms, as long as they fit within a list of purposes that are listed in clause 20.

[Vicky Ford (Chelmsford) (Con)]

I am very fond of the hon. Member and she has a beautiful voice, but she did complain earlier about how long it had taken this Bill to get to market. I urge her to remember that we want to get through the Bill as quickly as possible, for consumers. Repeating every single thing that we can already read in the explanatory notes and in the Bill does not seem to me to be the most efficient use of all of our time.

[Alex Davies-Jones]

I am grateful for that intervention. The hon. Member will know I am also fond of her and her voice. I think it is important to clarify exactly what we are debating, and why we are reasoning as we are. I will happily refer to certain clauses if that would please the hon. Member, but it is important that we outline exactly why we have come to the rationale that we have on the Bill as it stands before us.

Potential examples of prescriptive conduct requirements include having effective processes for handling complaints, trading on fair and reasonable terms, or giving users options or default settings. Conversely, some examples of prohibitive conduct requirements may be preventing abuse of dominance practices, such as treating its own products more favourably, using data unfairly, tying practices, restricting interoperability, refusal to grant access and so on.

We particularly welcome subsection (5), which provides that the CMA may impose conduct requirements only for certain objectives. However, we have concerns about subsection (10), which says that a conduct requirement

“(a) comes into force at a time determined by the CMA, and

(b) ceases to have effect—

(i) in accordance with a decision of the CMA”—

as Members can read in the Bill.

For swift implementation, it is right that the Bill’s approach allows for conduct requirements to be written alongside an SMS designation investigation, but we need a statutory time limit for the initial set of conduct requirements to be implemented. As it is likely that the DMU will have considered the three conduct objectives before the SMS designation decision is made, the DMU should be required to impose the initial set of conduct requirements either at the same time as the SMS designation or within three months of its date.

A central feature of the new regime is to enable the DMU to revise its rules as time goes on, so the deadline should apply only to the initial set of conduct requirements, so as not to hinder the DMU in revising or adding to them subsequently. Amendment 54 would introduce a timeline for the enforcement of conduct requirements set out in the Bill and in CMA guidance.

[Peter Dowd]

Given that subscription traps cost between £28 billion and £34 billion a year, my constituents in Bootle are perfectly entitled to listen to my hon. Friend ram home this point time after time, because £28 billion out of their pockets in someone else’s pocket is not appropriate, not reasonable and not fair, given the current cost of living crisis. My hon. Friend should speak as much and as long as she wants.

[Alex Davies-Jones]

I am grateful for that intervention. It is important that we get the Bill right. It is a very technical Bill. It is incredibly wordy—Members will have heard me trip over my words a number of times. It is important that we are able to portray the nature and benefits of the Bill to those listening at home or elsewhere, for the future and for the CMA, so that they understand what we as legislators mean when we speak in this place. That could influence decisions later. It is important for our constituents, who will be positively—we hope—impacted by the Bill. It will enable to have them more choice to hear exactly what we as legislators in this place mean.

The amendment introduces a timeline. It is important and we have given it some serious thought. I hope that the Minister has given it serious thought, too, because it would be helpful to ensure that the CMA is forced to act swiftly, as we have all discussed. I look forward to hearing his comments. I hope that he sees how beneficial this simple amendment could be. It is not meant to trick him; it is meant to make the legislation as positive and as beneficial as it can be.

[The Chair]

I remind the Minister that he may speak to clause stand part as well.

--- Later in debate ---

[Paul Scully]

I totally agree. That is exactly the point. Let us make it quickly, but we do not want an arbitrary timescale so that we rush and get the decision wrong. It is more important to get the answer right. For those reasons, I hope that the hon. Member for Pontypridd will withdraw her amendment.

[Alex Davies-Jones]

I have listened to the robust debate we have had. I still feel that having a timeline on the face of the Bill would provide transparency, clarity and certainty. Therefore, we will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

Permitted types of conduct requirement

[Alex Davies-Jones]

I beg to move amendment 53, in clause 20, page 12, line 11, at end insert—

“(ca) carrying on activities in an area of its business other than the relevant digital activity, which if they were done in relation to the relevant digital activity would be prevented under the provisions of this section.”

This amendment prevents a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business.

Amendment 53 aims to prevent a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business. We feel that the amendment gets to the heart of the issues at hand, and we urge the Minister to consider it carefully. It will prevent a Whac-A-Mole situation in which the regulator is always having to define new activities to catch up, and we see it as an essential part of the Bill.

[Paul Scully]

I am trying to work out the intention of the amendment. It seems that it would add a permitted type of conduct requirement in order to expand the ability of the DMU to intervene outside the designated digital activity; I am not sure that I understand whether my understanding of that is clear.

The regime is explicitly designed to address competition issues in activities when a firm has strategic market status—that is, when it holds substantial and entrenched market power and a position of strategic significance. In some circumstances, SMS firms may use other, non-designated activities to further entrench their market power in the designated activity. Clause 20(3)(c) allows the DMU to create conduct requirements to address that; however, it is important that the DMU does not intervene in non-designated activities beyond that.

SMS firms are likely to be active in a large range of activities, and in many of them will face healthy competition from other firms. The amendment would allow the DMU to intervene outside the designated digital activity, without any requirement to show that there is a link to the firm’s market power in any given activity. That could be harmful to competition, consumers and innovation.

We are worried about whether the regime can tackle retaliatory conduct. It is important that that ability is built in, because a retaliatory action is likely to be captured under conduct requirement categories to ensure fair dealing, such as those that prevent discriminatory treatment or unfair terms and conditions. We want the DMU to be able to take firm action against retaliatory conduct, whether or not that is within the scope of designation, but only if it can prove the link between the two. It is really important that that step happens first.

[Alex Davies-Jones]

I appreciate the Minister’s comments, although I disagree with him on the reasoning. We see the leveraging principle as critical to the success of the pro-competition regime. It is important to clause 20, which is a mammoth clause. Our amendment would prevent a designated undertaking from carrying on activities that would be prevented by the provisions in the clause. It is really important that the amendment is included so we will press it to a vote.

Question put, That the amendment be made.

Division 4

Ayes: 6

---

Labour: 5
Scottish National Party: 1

Noes: 8

---

Conservative: 8

[Alex Davies-Jones]

I beg to move amendment 58, Clause 20, page 12, line 22, at end insert—

“(i) discriminating against a recognised news publisher by withholding from an internet service material produced by the recognised news publisher.”

This amendment would allow a conduct requirement to be used to stop a designated undertaking withholding news from a recognised news publisher from its platform.

[The Chair]

With this it will be convenient to discuss new clause 2—Recognised news publisher: definition—

“(1) In section 20, ‘recognised news publisher’ means any of the following entities—

(a) the British Broadcasting Corporation,

(b) Sianel Pedwar Cymru,

(c) the holder of a licence under the Broadcasting Act 1990 or 1996 who publishes news-related material in connection with the broadcasting activities authorised under the licence, and

(d) any other entity which—

(i) meets all of the conditions in subsection (2), and

(ii) is not an excluded entity (see subsection (3)).

(2) The conditions referred to in subsection (1)(d)(i) are that the entity—

(a) has as its principal purpose the publication of news-related material, and such material—

(i) is created by different persons, and

(ii) is subject to editorial control,

(b) publishes such material in the course of a business (whether or not carried on with a view to profit),

(c) is subject to a standards code,

(d) has policies and procedures for handling and resolving complaints,

(e) has a registered office or other business address in the United Kingdom,

(f) is the person with legal responsibility for material published by it in the United Kingdom, and

(g) publishes—

(i) the entity’s name, the address mentioned in paragraph (e) and the entity’s registered number (if any), and

(ii) the name and address of any person who controls the entity (including, where such a person is an entity, the address of that person’s registered or principal office and that person’s registered number (if any)).

(3) An ‘excluded entity’ is an entity—

(a) which is a proscribed organisation under the Terrorism Act 2000 (see section 3 of that Act), or

(b) the purpose of which is to support a proscribed organisation under that Act.

(4) For the purposes of subsection (2)—

(a) news-related material is “subject to editorial control” if there is a person (whether or not the publisher of the material) who has editorial or equivalent responsibility for the material, including responsibility for how it is presented and the decision to publish it;

(b) ‘control’ has the same meaning as it has in the Broadcasting Act 1990 by virtue of section 202 of that Act.

(5) In this section—

‘news-related material’ means material consisting of—

(a) news or information about current affairs,

(b) opinion about matters relating to the news or current affairs, or

(c) gossip about celebrities, other public figures or other persons in the news;

‘publish’ means publish by any means (including by broadcasting), and references to a publisher and publication are to be construed accordingly;

‘standards code’ means—

(a) a code of standards that regulates the conduct of publishers, that is published by an independent regulator, or

(b) a code of standards that regulates the conduct of the entity in question, that is published by the entity itself.”

This new clause is linked to Amendment 58.

[Alex Davies-Jones]

The amendment would allow a conduct requirement to be used to stop a designated undertaking withholding news from a recognised news publisher from its platform. None of us want to see in the UK situations like those occurring elsewhere across the globe. Colleagues will be aware that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting or threatening to restrict access to domestic trusted news that is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that such firms place on profits, rather than citizens’ interests. The Government must absolutely not give in to similar threats in the UK.

As the EU and other jurisdictions have forged ahead with similar but ultimately less agile and effective digital competition regulation, there is a danger that the UK will become a rule taker and not a rule maker. I urge the Minister to consider carefully the principles of the amendment and new clause 2, which further outlines a favourable definition of a recognised publisher that Labour supports. I look forward to hearing the Minister’s comments, but if we are not reassured, we will press the amendment to a vote.

[Paul Scully]

As we have heard, amendment 58 and new clause 2 are intended to strengthen the regime’s protections for news publishers by defining “recognised news publisher” and introducing a specific power to protect them from discrimination. I understand and appreciate the sentiment behind the amendment and what the hon. Member for Pontypridd is striving to do. It is important that news publishers can benefit from the robust protections offered by the new regime. I am confident that the Bill, as drafted, will make an important contribution to the sustainability of the press. I hope the hon. Lady will understand when I expand on that, because the DMU’s tools, including all permitted types of conduct requirement, are designed to rebalance the relationship between SMS firms and those who rely on them, including firms and sectors across the economy. They are drafted in a sector-neutral way for that reason.

--- Later in debate ---

That could apply to a wide range of businesses, very much including news publishers. Adding a sector-specific type of conduct requirement on discrimination is therefore redundant. It would also create the risk of DMU interventions being unfairly skewed towards one sector at the expense of others. Right the way through, we have tried to ensure that the regime is not only technology-agnostic, but sector-agnostic.

[Alex Davies-Jones]

Is the Minister reassured that the Bill will not allow the emergence of a situation like those in Australia and Canada, where online disinformation is pumped around constantly because of the lack of clarity on platforms highlighting recognised news publishers?

[Paul Scully]

Yes.

--- Later in debate ---

[Paul Scully]

At the end of the day, this is an interpretation of the Bill. The amendment names a number of specific news publishers; our approach is sector-unspecific. All those will come within the regime of the Bill, but specifying just one sector would risk skewing the conduct of the regime and the way it works towards that sector. I think the question that was asked was whether those news publishers and the kind of behaviour that has been described come under the regime of the Bill, as drafted. We believe they absolutely do.

[Alex Davies-Jones]

I appreciate the Minister’s rationale, but leaving the interpretation of the Bill so ambiguous could mean certain platforms allowing news publishers that are not relevant news publishers to cause harm and damage to society and the public, as we have seen elsewhere in the world. It is imperative on us as legislators to get it right, and we have that opportunity in the Bill.

We have always said that we want this law to be world-leading. We wanted to be able to do things differently from the EU. This amendment gives us the flexibility to make that change and do things differently, which is why we will press it to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

The DMU will be able to use conduct requirements to address and prevent practices that exploit consumers and businesses or exclude innovative competitors. Clause 20 sets out an exhaustive list of permitted types of conduct requirement that the DMU can impose in order to address and prevent harm to businesses and consumers in digital markets. It ensures that the regime can adapt to future challenges by empowering the Secretary of State to amend this list, subject to parliamentary approval.

The list reflects insights drawn from the CMA’s market studies and regulatory expertise. It captures 13 well-evidenced types of anti-competitive behaviours including self-preferencing, tying and bundling, and the unfair use of data. Conduct requirements could be used to ensure that SMS firms interact with users of all kinds on fair and reasonable terms; that consumers are not discriminated against; or that competitors do not lose out because an SMS firm has used data unfairly. The list of permitted types of requirement reflects the competition issues we see in digital markets today, but these markets are fast-moving.

It is vital that the Secretary of State is able to amend the list in future, with Parliament’s approval, to ensure that consumers are protected from whatever new challenges arise. Setting out the types of permitted requirement in the legislation, rather than specifying the requirements themselves, means that the regime will be flexible and responsive. It will make it possible to impose targeted and tailored interventions that address harms to consumers, while avoiding unnecessary burdens and unintended consequences for SMS firms.

[Alex Davies-Jones]

Clause 20 is a mammoth clause that sets out an exhaustive list of permitted types of conduct requirement. Labour welcomes the clarity in the clause—as, I am sure, will the CMA and firms likely to be designated. Ultimately, pro-competitive interventions will tackle the causes of market power and are a necessary step to addressing the characteristics of these markets, such as network effects and economies of scale that tip some digital markets towards a single firm. Those interventions could also include mandating that consumers have greater choice over the collection and use of their personal data. They could even look at ownership separation. However, some digital markets cannot be made competitive, and in such cases the effects of market power must be managed. To do this, the DMU needs sufficient powers. We see the clause as central to getting that balance right.

Clause 20 states that conduct requirements may prevent the SMS firm from

“carrying on activities other than the relevant digital activity in a way that is likely to increase the undertaking’s market power materially, or bolster the strategic significance of its position, in relation to the relevant digital activity”.

The leveraging principle is critical to the success of the pro-competition regime. Without it, the DMU will find itself unable to address harmful conduct and will meet arguments about where—meaning in which activity—a piece of conduct occurs, because the DMU will be unable to touch conduct that occurs outside the SMS activity even if it is closely related to the SMS activity.

A stronger leveraging principle would prevent designated firms from simply moving their service fees from one location in the ecosystem to another, such as from app store service fees to an operating system licence—the stealth tax that we heard about during our evidence sessions. It would prevent a whack-a-mole situation in which the regulator always has to define new activities to catch up.

We have already debated our amendment, with which we were seeking a stronger principle. Sadly, it was not accepted by the Government, but we will push this further as the Bill progresses.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Content of notice imposing a conduct requirement

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 22 to 25 stand part.

[Paul Scully]

Clauses 21 to 25 set out the procedural aspects in relation to conduct requirements, because it is really important that SMS firms, and the people and businesses who rely on them, understand what obligations are being imposed and why. The DMU is required to give notice to the SMS firm and then publish the notice online as soon as is reasonably practicable. Clause 21 sets out the information that must appear in the notice.

Given the rapid pace of change across businesses and digital markets, it is important that the DMU can adapt conduct requirements to ensure that they remain targeted and proportionate, so clause 22 will establish the DMU’s power to revoke a conduct requirement, helping to ensure that conduct requirements remain targeted and proportionate as markets and firms change.

Clause 23 will allow the DMU to facilitate the smooth transition into or out of a conduct requirement. Without the clause, there is a risk of disruption or harm to businesses and consumers where a conduct requirement comes into force or ceases to have effect without a sufficient transition period.

The conduct requirements in clause 24 will impose tailored, enforceable obligations on SMS firms. It is only right that consumers and businesses, including the SMS firms themselves, have a chance to share their perspective on those obligations, so clause 24 requires the DMU to carry out a public consultation on its proposed decision before it can impose, vary or revoke a conduct requirement.

Clause 25 requires the DMU to keep conduct requirements under review, ensuring that requirements remain effective, targeted and proportionate. It also ensures that the DMU monitors where breaches may have taken place.

[Alex Davies-Jones]

Clause 21 sets out the information that the CMA is required to publish as part of the notice imposing or varying a conduct requirement. Labour supports the clause, which we feel is important for clarifying the details around the content of potential conduct requirements. Again, I am keen to understand exactly who will have access to such information. As ever, I would appreciate the Minister’s thoughts on that point. That aside, we see the clause as integral to the Bill, so we have not sought to amend it at this stage.

As with clause 21, we support clause 22 and its intentions in full. The only point that I feel is worth raising with the Minister is the slight ambiguity around the timeframes. It will be helpful for all involved if the regime is not only flexible, but rapid and able to evolve for changing markets. Can the Minister assure us that the clause will support this in practice?

Clause 23 is important and serves a vital function in establishing the transitional provisions related to conduct requirements. An example would be if a conduct requirement were imposed from a particular date, but some allowances were made in relation to certain aspects of that conduct requirement so that they had effect from a later date to smooth the transition for the benefit of a designated undertaking. That speaks to the nature of the regime: we all want to see it as flexible and fair, but it is therefore only right that the CMA be given appropriate statutory powers to vary its conduct requirements where required. We also welcome subsection (2), the details of which will enable and empower the CMA to investigate and enforce against historical breaches. That is vital, as we seek to establish a regime that will be sufficiently agile for breaches both past and present.

Clause 24 is also incredibly welcome. It imposes a duty on the CMA to consult publicly before imposing, varying or revoking a conduct requirement. The consultation must be brought to the attention of such persons as the CMA considers appropriate. We have already discussed who is an appropriate person, but sadly the transparency and commitment to consultation is not mirrored elsewhere in the Bill, which is frustrating. Given the broadly collegiate nature of our debate thus far, I hope that the Minister can consider some adjustments, and I look forward to hearing from him shortly. By and large, though, Labour welcomes the provisions in subsection (3), which provide that the CMA will be allowed to carry out a consultation on proposed conduct requirements before making a decision on designation. As we know, that makes it possible for the CMA to impose conduct requirements at the same time as issuing a decision on designation, or very shortly afterwards. We consider that to be a sensible approach, and we therefore support the clause.

Again, there is no need to repeat myself. Labour supports clause 25, which places a duty on the CMA to consider, on an ongoing basis, the effectiveness of any conduct requirements in place and how far the designated undertaking is complying with them. The CMA will also need to consider, on an ongoing basis, whether to impose, vary or revoke a conduct requirement, and whether it would be appropriate to take action against a breach of any conduct requirement. It would be helpful for us all to have an idea of how regularly the reviews will happen. It cannot and should not be the case that one SMS firm has its conduct requirements reviewed more regularly than any other, so I am keen to hear the Minister’s assessment of how that will work fairly and equitably in practice.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Sixth sitting)

Alex Davies-Jones Excerpts

Committee stage
Tuesday 20th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. Clauses 26 to 35 are about the enforcement of conduct requirements. The participative approach within the pro-competition regime means that the digital markets unit will aim to resolve issues with firms with strategic market status without the need for formal enforcement action. Where that is not possible, clause 26 will empower the DMU to investigate suspected breaches of conduct requirements by SMS firms and, where it finds a breach, consider what action can be taken. That is necessary to ensure that SMS firms comply with requirements.

Opening an investigation allows the DMU to make use of the full range of information-gathering powers set out in chapter 6. Where the DMU begins an investigation, certain information must be given via a notice to the SMS firm, and a summary of that notice must be published. Clause 27 will require that before the DMU can make a finding of the breach, it must consider any representations that an SMS firm makes in relation to the conduct investigation.

Clause 28 will allow the DMU to close a conduct investigation at any time without making a finding as to whether a breach has occurred. The DMU will need to explain why it is closing the investigation and account for its decision. That power is needed as it allows the DMU to react to changes during the investigation process. That could be, for example, needing to divert resources to an emerging high-priority competition issue elsewhere.

Clause 29 sets out the countervailing benefits exemption. The DMU’s objective is to promote competition for the benefit of consumers, and that will shape the design of its regulatory interventions, meaning that the DMU will take consumer benefits into account when designing conduct requirements in the first place. However, the inclusion of the countervailing benefits exemption provides a backstop to ensure that, if needed, consumer benefits can be explicitly considered at the enforcement stage, too.

During a conduct investigation, an SMS firm will be able to put forward evidence that its action brings about benefits for consumers that outweigh the potential harm to competition. That will reinforce that consumers are at the heart of the regime. The clause is not about pursuing textbook-perfect economic outcomes; it is about real-world outcomes for consumers.

Clause 30 will place the DMU under a duty to notify an SMS firm of the outcome of a conduct investigation within a six-month investigation period. That will ensure that investigations are executed within reasonable timeframes. That does not apply if the DMU has accepted a voluntary binding commitment from the firm relating to the conduct under investigation, or if the investigation is closed with no findings made. The duty to give a notice to an SMS firm and subsequently publish a summary online is vital to inform the firm under investigation of the outcome and keep relevant parties informed of DMU action.

Clause 31 will give power to the DMU to impose an enforcement order on an SMS firm where it has found a breach of a conduct requirement. Those orders will most often be cease-and-desist orders requiring bad behaviour to stop, but they can also require more complex behavioural changes where that is a more appropriate way to remedy a breach. When imposing or varying an enforcement order, the DMU has a power, rather than a duty, to consult those persons it considers appropriate. That will allow the DMU to consider relevant third-party and SMS representations on proposed enforcement action, while ensuring that enforcement orders requiring the SMS firm to simply stop bad behaviour are not delayed by a requirement to consult.

Clause 32 will grant a power to the DMU to introduce enforcement orders on an interim basis. The DMU needs to be able quickly to address immediate harms that may occur from suspected conduct breaches in order to prevent significant damage, prevent action that would make subsequent remedies ineffective, or protect the public interest. The clause will enable intervention before irreversible change occurs and will ensure that options to restore competition are maintained.

Clause 33 makes provision for the duration of enforcement orders and interim enforcement orders, and for the circumstances in which they cease to have effect. Clause 34 will establish the DMU’s power to revoke an enforcement order, ensuring that the enforcement orders in place remain targeted and proportionate. The DMU needs the flexibility to remove enforcement orders where they are no longer appropriate, so that SMS firms are not subject to unnecessary or inappropriate rules.

Finally, to ensure that enforcement orders are effective, targeted and proportionate, it is important that the DMU considers how they function and whether changes are necessary. Clause 35 will require that the DMU monitors the effectiveness of the enforcement orders in place. That includes assessing whether SMS firms are complying with existing enforcement orders, whether variation of an order is required and whether further enforcement action is needed.

In conclusion, clauses 26 to 35 set out robust enforcement provisions to make sure that the impacts of conduct requirements are realised.

[Alex Davies-Jones (Pontypridd) (Lab)]

It is an honour to serve under your chairship this afternoon, Mr Hollobone. With your permission, I will make some brief comments on the clauses, in response to the Minister.

Clause 26 is very welcome. It is an important clause that outlines the circumstances in which the CMA will be able to begin an investigation into a suspected breach of a conduct requirement, more formally referred to in the Bill as a conduct investigation. It is an important and positive addition. For too long, the CMA has not had the legislative teeth to make positive change in our digital markets. Ensuring that it has reasonable and sufficient powers such as those outlined in the clause is central.

Labour particularly welcomes the provisions and thresholds outlined in subsection (1), which make it clear that the decision to begin a conduct investigation will be grounded in empirical evidence, whether from complaints submitted by third parties or from the CMA’s own market studies. None of us wants to see overregulation or businesses stifled, but it is important that when the CMA has reasonable grounds to carry out a breach of conduct requirement, it has the tools available to act swiftly.

We note that subsections (3) and (4) outline the requirement for the CMA to give a notice to the undertaking about the investigation and set out the content required for that notice. We welcome the provisions entirely, as we do the clarification on the period in which a statutory investigation can take place. We think six months is reasonable, and we are pleased to see clarity on when the timeframe can be extended—a matter we will come to later when we address clause 102.

The current wording of subsection (6) states:

“As soon as reasonably practicable after giving a conduct investigation notice, the CMA must publish a statement summarising the contents of the conduct investigation notice.”

Could the Minister clarify exactly where, and to whom, that notice will be published? As I have previously stated in reference to other parts of the Bill, there are some grounds for making that information public, at least to those who request it. We appreciate the market sensitivities, but ultimately it is businesses that will be facing regulation over their digital practices, broadly for the first time, and they deserve access to that information. It will be a valuable tool for learning and best practice.

I will keep my comments on clause 27 brief because I think, or at least hope, that we all agree that it is an important clause that makes sure that the CMA is required to consider representations from the undertaking being investigated before making a decision on whether the undertaking has breached conduct requirements. I am keen to hear from the Minister exactly what sort of information he believes will be appropriate for the CMA to consider. A balanced approach to the regime is critical, but we do not want the CMA’s investigatory powers delayed by big firms who may choose to delay or overwhelm the process in any way. That aside, we support the clause and have not sought to amend it at this stage. Sincere apologies to Committee members for my repetition, but this is a far more collegiate Committee than others I have sat on.

We support clause 28 and its intentions. As we know, the clause provides that the CMA can choose to close a conduct investigation without making a decision about a breach, and sets out the process and timing for giving a notice to the undertaking about the closure and publishing a summary of the notice. We welcome provisions and clarity over this process. The CMA could summarise the contents of the notice provided to the relevant designated undertaking, while allowing it to redact some information for confidentiality purposes. However, we feel that there is a strong argument, once again, for making that information public to anyone who wishes to request a copy.

Labour welcomes the intentions of clause 29, which outlines the procedure that the CMA must follow where a breach of a firm’s conduct requirement results in net benefits for consumers. This is an important clause, and it is vital that we have such an exemption to ensure that the regime does not inadvertently harmfully impact consumers. However, the countervailing benefits exemption must not be drawn too broadly. If the exemption is too broad, SMS firms will be able regularly to avoid conduct requirement compliance by citing security and privacy claims, as well as spamming the CMA with numerous studies, thus diverting its resources, which, as we have discussed, are very precious. This would undermine the entire regime by severely limiting the efficacy and efficiency of the conduct requirements. I therefore wonder whether the Minister has considered including in the Bill an exhaustive or non-exhaustive list of acceptable grounds for exemption.

Broadly speaking, though, Labour welcomes the Government’s approach, which has similarities with the approach taken in the Competition Act 1998. It would be remiss of me not to remind the Minister that that important Act came into being thanks to a Labour Government. The reality is that Labour has always been committed to getting this balance right. We want to support big businesses, while also protecting consumers and encouraging innovation. These principles do not have to be mutually exclusive. That is why we particularly welcome clause 29(2), which sets out the criteria for the exemption, including that the benefits need to be

“to users or potential users of the digital activity in respect of which the conduct requirement in question applies,”

and must

“outweigh any actual or likely detrimental impact on competition resulting from a breach of the conduct requirement”.

As we know, some examples of benefits may include lower prices, higher-quality goods or services, or greater innovation in relation to goods or services.

Clause 29 also makes it clear that it must not be possible to realise the benefits without the conduct, which means that the CMA must be satisfied that there is no other reasonable or practical way for the designated undertaking to achieve the same benefits with less anti-competitive effect. That is an important clarification, which is once again a sensible approach that we feel is crucial to getting the balance of this regime right.

Although I know that colleagues will be aware of the example highlighted to us all in the Bill’s explanatory notes about a default internet browser receiving security updates possibly being an exemption, I wonder whether the Minister can give us additional examples of situations in which he would see the clause coming into effect. That aside, we support the intentions of clause 29 and see it as a positive step in terms of putting consumers and common sense first.

We see clause 30 as being fairly procedural, in that it outlines the circumstances in which the CMA must give notice about the findings of a conduct investigation. We are pleased to see that a period of six months has been established; none of us wants to see this process going on unnecessarily. We note, however, that in subsection (1), and in the Bill generally, we truly believe that more transparency is required. As it stands, the Bill is missing an opportunity to afford civil society, academics, businesses and consumers alike the opportunity to learn from the regime and ultimately to improve best practice in our digital markets more widely.

We welcome clause 31. However, we note that subsection (4) specifies information that the enforcement must contain, while subsection (5) requires that the CMA

“may consult such persons as the CMA considers appropriate before making an enforcement order”,

or varying one. Again, the wording is very subtle, but I am most interested to hear from the Minister exactly why the consultation process is a “may” rather than a “must”.

Throughout the Bill in its current form, there appears to be a lack of points for stakeholders to engage with the CMA decisions through consultation. Although the CMA being able to design rules and interventions for each firm could result in more effective remedies, it also increases the risk of regulatory capture, whereby SMS firms write their own rules and get them rubber-stamped by the regulator. That makes proper consultation essential. I would appreciate clarification on that point from the Minister.

Clause 32, as its title suggests, gives the CMA the power to make enforcement orders on an interim basis. This is an important tool to allow the CMA to act rapidly where a potential breach is concerned. It is particularly welcome that subsection (1)(b) lists the circumstances under which interim enforcement orders can be made, and that these are broadly around preventing damage to a person or people, preventing conduct that could reduce the effectiveness of the CMA, or protecting the public interest. It is important for all of us with an interest in the Bill that that is clearly outlined in the Bill, so that is very welcome indeed.

Clause 33 makes provision for enforcement orders and interim enforcement orders to come into force, and outlines the circumstances in which they cease to have effect. We see this clause as, again, a fairly procedural one. We welcome the clarity of subsection (4), which will ultimately enable the CMA to take action against historic breaches. That is imperative, given the pace at which our digital markets and regulated firms can shift. We therefore support the clause and believe that it should stand part of the Bill.

On clause 34, as with previous clauses, there is no need for me to elaborate at great length. In essence, we agree with the clause.

As we know, clause 35 outlines that the CMA must keep the enforcement orders and interim enforcement orders that it has made under review, including whether to vary or revoke them, and also the extent to which undertakings are complying with them and whether further enforcement action needs to be taken. This is an incredibly important point. The CMA must review its own homework, as we expect all regulators to do. However, I wonder what assessment the Minister has made of making those reviews public. The CMA must have a degree of accountability, particularly to Parliament. We feel that that is somewhat lacking in the Bill as it stands.

More widely, that points to the lack of opportunities for stakeholders to engage with the CMA and its decisions through consultation, as I have previously said. This is a significant problem, given the nature of the regime. On the one hand, the flexibility and agency that the DMU has to tailor its regulatory approach depending on the nature of the firm should allow it to design more effective remedies. On the other, it increases the danger of regulatory capture by SMS firms. I would appreciate the Minister clarifying that point so that we get this right.

--- Later in debate ---

[Paul Scully]

I turn to the clauses on commitments related to conduct requirements. The ability of the DMU to accept commitments, which are voluntary and binding obligations, from SMS firms is important to support the participative approach to regulation that I have spoken about. That approach promotes greater efficiency and the swift resolution of investigations.

Clause 36 will allow the DMU to accept commitments from a firm during a conduct investigation. Firms will be able to offer commitments to the DMU to propose a solution to a suspected breach of conduct requirements. There will be robust safeguards in place to ensure that commitments are used appropriately. The DMU will need to publicly consult on any proposal to accept a commitment. Commitments can be varied to reflect changes in circumstances and will remain in force until either the DMU decides to release the SMS firm from the commitment or the conduct requirement to which the commitment relates comes to an end.

Clause 37 will ensure that the DMU is required to monitor the commitments that are accepted. That includes assessing the appropriateness of the commitments; whether SMS firms are complying with the commitments; and whether further enforcement actions are needed. To ensure that commitments are accepted, varied or revoked in a transparent way, schedule 1 sets out the procedures relating to commitments.

The procedures in schedule 1 also apply in relation to commitments for pro-competition interventions, but I will speak about those at a later stage. Schedule 1 ensures that the DMU publishes a notice detailing the commitment or proposed varying or revocation of the commitment and the reasons for its decision. The DMU must also consider any representations made in accordance with the notice before accepting, varying or revoking commitments. Without the ability to accept commitments, the DMU would have to use greater resources to further investigate breaches, and then develop and impose enforcement orders to fix them. The swift and effective resolution through binding commitments will be beneficial for the DMU, affected firms and ultimately consumers.

[Alex Davies-Jones]

Labour supports the intentions of clause 36, which ensures that the CMA can accept binding voluntary commitments from an undertaking during a conduct investigation to bring the investigation to an end. Once again, we feel that that is critical to a flexible and fair regulatory regime. It is only right that the CMA is empowered to continue an investigation into other behaviour and, when it can, investigate the same behaviour again. Therefore, we particularly welcome subsection (4).

That being said, there is no mention of consultation regarding the accepting of commitments from SMS firms, even though that will close a conduct requirement investigation and the commitments accepted will impact stakeholders. There is also no consultation when the CMA chooses to release an SMS firm from the commitments. Again, we feel that those points are worth clarifying. I would be grateful if the Minister could outline exactly why the Bill fails to place a duty on the CMA to consult appropriately on that important point.

Schedule 1 and its provisions relate to the commitments on firms, and it is very welcome. The schedule outlines the duty on the CMA to publish a notice, and consider any representations made in accordance with the notice that are not withdrawn. That is a logical and sensible approach. We also welcome the range of provisions in the schedule that provide extensive clarity on the CMA’s responsibilities in relation to its decision making. We have repeatedly called for more clarity with a number of amendments, so I hope the Minister will carefully consider our reasonable requests. Overall, schedule 1 is an important part of the Bill that further clarifies the CMA’s responsibilities, and we support its inclusion.

Without mirroring the comments that were made when we considered clause 25, Labour supports clause 37. It is vital for the regime to function now and into the future that the CMA has a duty to review those commitments. I am interested to know the Minister’s thoughts on how frequent the reviews should be, but ultimately this is the right approach if we are to ensure and encourage total compliance. I hope that the Minister will assure us that the Government are open to improving the Bill when it comes to transparency, including parliamentary oversight. With that in mind, we do not have any specific amendments to clause 37 at this stage, but that could change.

[Paul Scully]

To answer the hon. Lady’s point about consultation in clause 36, I will point her to schedule 1(2), which requires the DMU to consult on commitments before they are accepted or varied. Although that requirement is not in clause 36, it is in schedule 1.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 37 ordered to stand part of the Bill.

Clause 38

Power to adopt final offer mechanism

--- Later in debate ---

[Paul Scully]

Government amendment 4 redefines what transactions can be dealt with under the final offer mechanism. It is accompanied by several consequential amendments to clauses 38 to 41. One of the conditions for the use of the final offer mechanism as currently drafted is that it can be used only in relation to a “proposed” transaction, where an SMS firm provides goods or services to the third party, or uses or acquires goods or services from the third party.

However, for the final offer mechanism to be most effective, it is crucial that the definition of “transaction” includes the future performance of an existing transaction, as well as new transactions that will happen in the future. That will ensure that parties who are already transacting with each other but on unfair and unreasonable payment terms are not excluded by the conditions for using the final offer mechanism. These are consequential, technical amendments that have been produced alongside feedback from the CMA.

[Alex Davies-Jones]

We welcome the first group of Government amendments, which we see as important clarifications to ensure that the final offer mechanism can be applied in relation to the future performance of an ongoing transaction. We support their inclusion, as those changes should stand part of the Bill.

Amendment 1 agreed to.

Amendments made: 2, in clause 38, page 21, line 1, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 3, in clause 38, page 21, line 7, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 4, in clause 38, page 21, line 13, at end insert—

“(4A) In subsection (1), ‘transaction’ means—

(a) a future transaction, or

(b) the future performance of an ongoing transaction,

whether in accordance with a contract or otherwise.”

This amendment, together with Amendments 1, 2, 3, 6, 8, 9, 11 and 45 means that the final offer mechanism could be applied in relation to the future performance of an ongoing transaction.

Amendment 45, in clause 38, page 21, leave out line 20 and insert—

“‘the transaction’ means the transaction mentioned”—(Paul Scully.)

See the explanatory statement for Amendment 4.

Question proposed, That the clause, as amended, stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 39 stand part.

Government amendment 7.

Government amendment 10.

Clauses 40 to 43 stand part.

Government new clause 1—Decision not to make final offer order—

New clause 3—CMA annual report on final offer mechanism—

‘(1) The CMA must, once a year, produce a report about the final offer mechanism.

(2) Each report must include information about—

(a) the number of final offer orders the CMA has made over the previous year;

(b) for each final offer order—

(i) the amount of time taken between final offer initiation notice being given and the final offer order being made.

(ii) whether bids were submitted by both the undertaking and the third party, and

(iii) the outcome of the process; and

(3) The CMA may provide the information in such a way as to withhold any details that the CMA considers to be commercially sensitive.

(4) The first report must be published and laid before both Houses of Parliament within one year of this Act being passed.’

This new clause requires the CMA to publish an annual report on the workings of the final offer mechanism. The report will be made publicly available and will be laid in both Houses of Parliament.

--- Later in debate ---

Finally, on new clause 3 I fully recognise the importance of transparency in a regime in general, and regarding the use of this novel tool in particular. However, the Bill as drafted already contains a robust process for ensuring transparency on the rare occasions that this tool will be needed through the clear public statements published by the DMU at significant points in the process, including about any final offer orders made. Those statements will provide information about the operation of the final offer mechanism in practice, ensuring clarity as to how and when the tool is being used for the sake of stakeholders, as well as interested parliamentarians. That is in addition to the annual report already prepared and delivered to Parliament by the CMA, which will also cover its activities under the regime. As such, an additional annual report would not offer Parliament any greater insight into the use of that tool, and therefore I do not believe that the new clause would provide any additional benefit. I hope that the hon. Lady feels able to withdraw it.

[Alex Davies-Jones]

As we know, there are several provisions contained in the Bill that could form the basis of new rules regulating agreements between UK news media and digital platforms, akin to the news media bargaining code in Australia. However, the formulation of those rules will be at the discretion of the DMU, and would apply on a case-by-case basis. As we have debated, the Bill currently enables the DMU to impose conduct requirements that are for the purposes of obliging undertakings to

“trade on fair and reasonable terms”.

Those undertakings could also be obliged by the DMU to not carry on activities other than their digital activities in a way that could be anti-competitive. That could be the case where carrying out that non-digital activity is likely to increase an undertaking’s market power materially or bolster the strategic significance of its position in relation to its digital activity.

The Bill also provides an arbitration process called a final offer mechanism. Under that mechanism, the DMU will invite the SMS firms and third parties to submit a payment terms offer that they regard as fair and reasonable. The DMU is then required to choose one party’s offer only, without any ability to determine alternative offers. That process has been adopted in Australia for the purpose of arbitrating bargains between digital platforms and news media providers, although it has not yet been used. While there is no provision for a media bargaining code in the Bill, the mere existence of this mechanism will hopefully drive tech platforms to negotiate sincerely with media providers in that context to reach an agreement independently, rather than risk the CMA choosing the final offer. We entirely welcome this clause, and the additional relevant ones to follow.

In the digital media sector, Google and Meta’s overwhelming market power means that publishers are not compensated fairly for the significant value that their content creates for platforms, which is estimated at about £1 billion per year here in the UK. Google Search and Meta’s Facebook rely on news publishers to attract and engage users, as professional news content is reliable and regularly updated. It is absolutely right that the CMA will be empowered to make pro-competition interventions. While the conduct reviews will hopefully prevent the worst abuses of market power, PCIs will allow the DMU to implement remedies that address the root cause of that market power. For example, a CR could prevent an SMS firm from self-preferencing its own businesses in the digital advertising market, which has negative impacts including locking businesses into products and taking an unfairly large cut of revenues, whereas a PCI could require a functional separation to remove the incentive for self-preferencing. Labour sees that as a hugely important tool. We want to see and support an empowered DMU, so we are pleased to support the clause and believe it should stand part of the Bill.

Again, we see clause 39 as important: it sets out the process that the CMA must follow if it decides to use a final offer mechanism. In theory, the DMU should support publishers, who will now be able to negotiate fair and reasonable terms for the value that news content brings to platforms. If SMS firms refuse to comply, a final offer mechanism will be available, with each party submitting bids and the fairest offer being selected. The DMU will ensure that publishers receive a fair share of revenues for the advertising that is shown around their content. Publishers will also be able to receive user data when consumers interact with their content on platform services, in a manner compliant with data protection law. In theory, unfair commissions on app store sales will be prevented, ensuring that publishers can build sustainable digital subscription businesses.

These are all very welcome developments indeed. We particularly welcome subsection (3), under which the CMA must specify if it is considering taking any other action to address the underlying cause of the breach that led to the use of the FOM—for example, a pro-competition order instructing a designated undertaking to provide access for third parties to consumer data held by that undertaking, which could rebalance bargaining power within that digital activity. It will come as no surprise that I ask the Minister, once again, to clarify whether such statements will be published in the public domain. This important point is worth clarifying, so I look forward to hearing about the adequacy of the transparency provisions in this part of the Bill.

Government amendments 7 and 10 are linked to Government new clause 1. They clarify that parties can still settle outside formal processes once the FOM stage has begun. Given that the aim of the final offer mechanism is to incentivise parties to come to a deal without direct CMA intervention, it seems right that parties are still able to come to a deal outside this formal process. This may allow for more favourable terms to be reached, as the platforms will be under pressure in the FOM process, and it will mean that publishers can avoid the uncertainty of the CMA picking one of the two offers.

There will always be a concern that the asymmetry of resources might mean that publishers compromise too far when faced with the uncertainty of an FOM decision but, ultimately, Labour supported these provisions when they appeared in clause 40, and moving them to ensure that a deal can be reached outside the FOM at any time after a final offer intention notice has been issued seems to make good sense. We therefore support the Government amendments.

Unsurprisingly, Labour also welcomes clause 40, which establishes the process that the CMA must follow with regard to the outcome of the FOM process. We need not go into much detail on this clause, as we view it as a fairly standard and effective way of ensuring that proposed transactions are fairly processed by the CMA.

At this point, I must press home the wider importance of these final offer mechanisms because, if they are implemented correctly, they could have incredibly positive benefits. Indeed, we know that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting, or threatening to restrict, access to domestic trusted news, which is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that these firms place on profit, rather than citizens’ interests. The Government should not give in to similar threats here in the UK, and I hope the Minister is listening.

As the EU and other jurisdictions have forged ahead with similar, but less agile and effective, digital competition regulations, there is a danger that the UK will become a rule taker, not a rule maker. Delayed or weakened legislation will leave UK businesses at a competitive disadvantage internationally, and will deny UK consumers lower prices and more innovative products. In contrast, a strong, forward-looking DMU regulation will ensure that digital markets live up to their potential, allowing consumers to enjoy the full benefits that technology can deliver. I hope that the Minister can reassure us that the Government will not bow to pressure and that the CMA will rightly be compelled to intervene where necessary.

Labour supports the intention of clause 41, which we also see as standard practice. Colleagues will note that subsection (1) provides that a final offer order must impose obligations on the designated undertaking that the CMA considers appropriate for giving effect to the final offer payment terms it has decided, and they must be included in the proposed transaction.

Again, subsection (2) sets out exactly what information the CMA must give to the parties, and we welcome the provision. I further note that subsection (3) requires the CMA to publish a statement summarising the final offer order, and this transparency is also welcome. It is unclear who will have access to these statements, so I am keen to hear the Minister’s assessment of the value of making such documents public to anyone who wishes to seek them. This aside, we support clause 41 and believe it should stand part of the Bill.

Labour supports clause 42 and particularly welcomes subsection (3). This is an important clause as it empowers the CMA to take action on both historical and live breaches. Concerns reported to us by tech companies include requiring clarity on the terms of these final offer mechanisms. It is well known that many users sign up to digital platforms, via terms and conditions, to access a service with no monetary exchange as part of the agreement. Does the Minister see this counting as a contract that is challengeable via the final offer mechanism under the DMU regime? Although the regime appears clear, the final offer mechanism relates to pricing disputes and there are concerns that it could be drawn wider. Clarity on this point is vital and is worth establishing on the record, so I am keen for the Minister to address it.

I do not have any specific comments to make on clause 43. As we have previously said, Labour believes it is important that the CMA must be legally obliged to keep these final offer orders under constant review. This is the nature of a workable, agile regime, and we therefore support the clause standing part.

We tabled new clause 3 to require the CMA to publish an annual report on the workings of the final offer mechanism. This report should be made publicly available and should be laid in both Houses so that Parliament has its say.

We recognise that the final offer mechanism is fairly unique, and it is therefore only right that the CMA is required to update the House each year, with findings on the number of SMS firms that are subject to these investigations. The Minister mentioned that the CMA will be obliged to provide an annual report to Parliament; I want it to be clear that what we have set out in new clause 1 on the final offer mechanism would be part of that report so that Parliament could scrutinise how many were made, for example. This would add to and support the other transparency measures we have pursued, so I hope the Minister not dismiss the new clause, but will consider it carefully. We feel that that is an important matter to get on record in any annual review.

[Paul Scully]

I appreciate the spirit in which the hon. Lady has engaged in our debate on these clauses. I shall try to answer her questions in turn.

Publication will be online, so people will be able to see it. It will be public. The hon. Lady’s second question was: will I listen? Absolutely yes, I will. On her third question—will I not bow? I will bow to her, but not to pressure, because I think we have largely got this right. I cannot remember her last question—

[Alex Davies-Jones]

It was about new clause 3.

[Paul Scully]

Oh yes. It is important that we examine the efficacy of the final offer mechanism, so it is appropriate that that will be covered in the CMA’s review of all its work, and that we will get to see and assess that work as well. I can stand here and tell the Committee that I think we have got it right now, but things change. Yes, it is flexible, and yes, it is proportionate, but we want to make sure that it stays world beating.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clause 39

Final offer mechanism

Amendment made: 6, in clause 39, page 21, line 32, leave out “proposed”.—(Paul Scully.)

See the explanatory statement for Amendment 4.

Clause 39, as amended, ordered to stand part of the Bill.

Clause 40

Final offers: outcome

Amendments made: 7, in clause 40, page 22, line 25, leave out

“included as terms of”

and insert

“given effect for the purposes of”.

This amendment means that terms as to payment are to be given effect for the purposes of the transaction, or of any substantially similar transaction, rather than having to be “included” as terms of the transaction.

Amendment 8, in clause 40, page 22, line 26, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 9, in clause 40, page 22, line 28, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 10, in clause 40, page 22, line 36, leave out subsections (6) to (10).—(Paul Scully.)

See the explanatory statement for NC1.

Clause 40, as amended, ordered to stand part of the Bill.

Clause 41

Final offer orders: supplementary

Amendment made: 11, in clause 41, page 23, line 19, leave out “proposed”.—(Paul Scully.)

See the explanatory statement for Amendment 4.

Clause 41, as amended, ordered to stand part of the Bill.

Clauses 42 and 43 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)