United Kingdom Internal Market Bill

Baroness Henig Excerpts

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th November 2020 Lords Chamber

In the light of the reasons I have set out today, the Government do not consider that the amendments in the group are necessary. I hope that noble Lords will withdraw or not move them.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have received a request to speak after the Minister from the noble Lord, Lord Fox.

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[Lord Callanan (Con)]

I thought that I had put the matter to rest by writing the letter to the noble Lord, Lord Purvis, on which the noble Lord, Lord Fox, has commented. In our view, there is no doubt that the regulation of tuition fees is outside the scope of the Bill and, therefore, beyond the scope of the office for the internal market’s functions. But as the letter to him confirmed, we will keep the matter under review and not hesitate to take action if there is a problem, which we do not believe exists.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

The noble Lord, Lord Stevenson, and the noble Baroness, Lady Neville-Rolfe, also wish to speak after the Minister.

[Lord Stevenson of Balmacara (Lab) [V]]

I asked the Minister a specific question on whether the framing of Clauses 38 to 40 was exactly the same, or differed from, the existing powers of the CMA. He did not answer that. I do not want to delay us too much today but perhaps he could write to me about it.

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Amendment 150 not moved.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

We now come to the group beginning with the question that Clause 38 stand part of the Bill. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this question or anything else in the group to a Division should make that clear in the debate.

Debate on whether Clause 38 should stand part of the Bill.

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On the other side, there are also circumstances where much more has been opened up for challenge by businesses through Clause 31, giving reach into administrative decisions; and, as mentioned in the impact assessment on page 29, legal actions may occur, possibly as a follow-on. This may also extend beyond UK shores, so can the Minister explain the scope for investigative actions from other countries that the provisions in the Bill create? For example, will the CMA accept third-country complaints under Clause 31? Or, when we get to it next week, under the wording in Clause 50, what third-country actions are opened up in services that are beyond the WTO provisions? Using the example mentioned by my noble friend Lord Fox, an English water company might actually respect the mutual Welsh water companies, but could a foreign water company intervene?

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I am assuming that the noble Lord, Lord Naseby, has scratched from this group, so I call the noble Lord, Lord Tyrie.

[Lord Tyrie (Non-Afl)]

Some very interesting points have just been made that bear serious consideration, and the concerns we have just heard are reasoned, particularly on SMEs. At the very least, the Government may wish to offer a review of the CMA’s use of these powers, after an interval, to give us the assurance that they are being proportionately deployed and to see whether they need some amendment. The argument that they were derived from legislation the purpose of which was very different is well taken and might point to further amendment.

Overall, I support the Government in what they are trying to do here, having decided to create the OIM. It is true that the powers are robust, but they will need to be. If the CMA is to be expected to offer timely and high-quality advice, it will need to secure information quickly, without being given the runaround by devolved Administrations or parts of the private sector.

The penalties proposed are a weakness, though. Crown immunity will be in play for the devolved Administrations. I would be interested to know what thought the Government have given to the penalties that can be imposed for non-compliance in those cases. Public censure might help; on the other hand, a devolved Administration standing up to nasty Westminster might win local plaudits, resulting in the opposite effect. A lot of careful thought needs to be put into this issue if these measures are to be made effective. The proposed fines on the private sector are capped at £30,000. I simply do not see that sum troubling a recalcitrant or determined large third party. Has the Minister considered larger fines in certain circumstances?

It might be helpful to make one more general point. The CMA’s existing arrangements for securing compliance and information gathering across all its other functions are manifestly inadequate, as I saw it during my time there. They should not be used as a benchmark. Incidentally, the £30,000 figure comes from the merger regime. Something has to be done. The European Commission recently fined Facebook £1.6 million for not supplying information, while the CMA recently fined Amazon £30,000 over the merger with Deliveroo for not supplying information. That should give some idea of the disparity.

In February 2019, the CMA put proposals to the Government for improvements to information-gathering powers across all its functions. First, it needs to be able to gather information from a much wider range of sources to reflect the increasingly digital nature of the information that it is trying to collect: iCloud, machine-learning algorithms and so on spring to mind. These are not at all easy to capture with existing legislation. Secondly, and even more importantly, subject to safeguards, the CMA needs a general information- gathering power outside the context of a formal investigation. I do not like giving general powers, but I think the CMA now needs this to find out what is really going on in markets and enable it to think through much better than it can at present. It needs to be able to use the full range of tools to best bear down on consumer detriment. It is struggling to do that at present, and increasingly so with the growth of rip-off culture.

When the Minister returns to his department, he will find the proposals, of which I am just touching the surface, have been fully developed by the CMA and are sitting with his officials. Will he agree to take another look at those proposals to see what might usefully be drawn from them? For improving the ones we are discussing today, quite a lot of what is in there is likely to be relevant. Will he agree to report back to the House on what he has found?

I have been following this Bill closely, particularly Part 4, which I have an interest in because of my previous job. Some very important points have been made across the Committee, not least in Monday’s relatively brief debate on Clause 28 about whether the CMA is the appropriate body in the beginning to have responsibly for these functions. Those points are sufficiently important for us to have another look at them on Report. I hope the House will find a way to enable us to do this.

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[Lord Callanan (Con)]

I thank all noble Lords who have taken part in this debate. I apologise to the noble Baroness, Lady Hayter, if she found my letter disappointing; I will try to do better next time. The noble and learned Lord, Lord Falconer, looks disapproving; I am not going to write him any more letters if that is the case.

With regard to exclusions on services, all services subject to the authorisation requirements or the regulatory requirements are affected under the Bill unless they are specifically excluded from some or part of the rules under Part 2. I hope that that clarifies the noble Baroness’s question—if not, I will be happy to write her another letter. She is shaking her head in disbelief.

I say to the noble Baroness, Lady Bowles, with regard to her question on consultation, that we consulted on the general office, what enforcement provisions there should be and whether or not it should be included as part of an arm’s-length body. Once we had made the decision that it should be located within the CMA, there was of course extensive discussion between officials and the CMA on the powers and how they will be enforced. I say to my noble friend Lord Tyrie that I am of course aware of the proposals that he refers to on the CMA and I will be happy to take another look at them.

Addressing the specific questions on this clause stand part debate, I will set out the rationale for these clauses. Clause 38, as I believe we already discussed in the previous group, sets out the powers that the Competition and Markets Authority will have to gather information in support of its monitoring, advisory and reporting functions. As I said previously, in order to carry out its functions the OIM must have access to high-quality information to produce accurate, relevant and credible reports. Clause 38 will ensure that the CMA is able to require the assistance of third parties to perform its functions and is able to independently gather evidence in a timely manner.

I hope that the noble Baroness, Lady Bowles, agrees with me that presenting analysis based on partial or inaccurate information could be detrimental to the regulatory decisions taken as a result of OIM reporting and monitoring and would damage the reputation of the OIM among many key stakeholders in these fields. The powers in this clause are therefore put on a strong statutory footing. They will ensure that the reporting that the OIM undertakes will be as effective and comprehensive as possible for the benefit of policy-makers in the UK Government and the devolved Administrations, significantly strengthening existing stakeholders’ ability to navigate the new UK internal market.

Clause 39 describes what action the CMA is able to take in response to non-compliance with the information requests described in Clause 38. As noble Lords said, the CMA has existing powers under the Enterprise Act 2002 regarding non-compliance with its information requests. This is necessary to enable the CMA to carry out its functions effectively. As with Clause 38, the provision for the OIM in Clause 39 is modelled on those powers. The clause will allow the CMA to determine the most appropriate policy approach and the amount of any financial penalty to be imposed within the limits that have been prescribed. The clause also sets out the conditions where financial penalties may not be imposed because more than four weeks has expired since the CMA exercised its relevant functions.

Clause 40 sets the parameters that the CMA should consider for financial penalties in cases of non-compliance with an information-gathering request notice. Let me first say that I understand the concerns of noble Lords, but the preference and expectation will always be that information gathering is on a voluntary basis. The Government do not anticipate that the CMA will need regularly to fall back on the information-gathering and non-compliance powers. However, it is important to ensure that this facility is available to the CMA to detail how penalties will be set. As with other provisions, the Government have chosen to mirror the relevant provisions of the Enterprise Act 2002.

I can say to the noble Lord, Lord Tyrie, and my noble friend Lady Neville-Rolfe that the Secretary of State will make regulations specifying the maximum amounts in practice within the specified ceilings for these penalties in consultation with the CMA and other interested parties. I can confirm for the benefit of the noble Baroness, Lady Hayter, that the devolved Administrations will of course be consulted as part of this. In addition, and as noted in our debates on previous groups, I confirm to the noble Baroness, Lady Bowles, and the noble Lord, Lord Tyrie, that the CMA will not be able to issue a financial penalty against the UK Government or any devolved Government. Let me be very clear about that. Let me also assure the noble Baroness, Lady Bowles, that the Government are committed to not taking any steps to bring in the financial penalties until there is credible evidence that there is a need do so, so we will not commence these provisions without that credible need being demonstrated.

I will deal with a couple of other questions. The noble Baroness, Lady Bowles, asked about third-party requests. Such requests would be permissible if they were within the scope of Clause 31 and the CMA thought that they were appropriate. As I confirmed earlier, the White Paper invited consultation responses on how the functions to be delivered should be implemented as well as on whether an existing arm’s-length body should deliver them or bespoke arrangements should be established. As is obvious, we decided after that consultation that the OIM should be situated within the CMA.

With the reasons I have set out, I hope that I have been able to reassure noble Lords on their legitimate concerns and on why this clause should stand part of the Bill. I hope that the noble Baroness will feel able to withdraw her amendment.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have had a request to speak after the Minister from the noble Lord, Lord Fox.

[Lord Fox (LD)]

My Lords, I thank the Minister for his answer. I have two questions. First, does the Minister understand the difference between a voluntary activity and a voluntary activity where there are potential fines? It is the difference between cleaning the house voluntarily and cleaning the house knowing that I could have my tea withdrawn if I did not. There is a very big difference. That needs to be understood in terms of the culture of the way in which this information is sought. Does the Minister understand that difference?

Secondly, my noble friend Lady Bowles asked a series of questions about what is permissible as a reason for not delivering information. There was a huge multiple choice question and an overarching question. I think that the Minister dodged—sorry, I withdraw that word. The Minister did not answer any of those points. They were an important element of my noble friend’s questions so will he address them, perhaps generally today and more specifically, bearing in mind the very specific questions that she asked, in one of his letters?

[Lord Callanan (Con)]

With regard to the noble Lord’s first question, I understand why his cleaning abilities might not be up to standard and he might not get his tea. With regard to the questions asked by the noble Baroness, Lady Bowles, on reasonableness, we certainly do not intend to create disparity within the CMA over the functions it carries out and the processes it follows.

To be serious, of course I understand the difference between being asked to do something voluntarily and being asked to do something voluntarily with the back-up of potential penalties. The powers and penalties in question are similar to those used by the CMA for its existing functions, such as conducting market studies. This will ensure consistency in the way that the CMA, under its existing and its OIM capacities, interacts with stakeholders across all its functions. We do not intend to commence the powers on fines until it is proved that they are necessary, as I said.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have had a request to speak from the noble Baroness, Lady Neville-Rolfe.

[Baroness Neville-Rolfe (Con)]

I thank my noble friend for his assurance on commencement. He did not answer my specific questions, but I think that the answer in general terms was that the Government have taken the same powers as the CMA has on competition and applied them pro rata. Perhaps I can pick up something that the noble Lord, Lord Stevenson, said earlier. I wonder whether we could look at this line by line to see whether things are or are not all the same; that would be a helpful Committee-type process.

I really got up to ask a question about examples. The Minister helpfully gave an example of a penalty regulation—he said that he might make regulations with penalties under £30,000, perhaps at a lower level for particular things—but I am confused about what kind of regulations are going to be made here. That may be an impossible question to answer but if my noble friend could give us some more examples, perhaps ones that are in draft or have gone out to consultation, it would be incredibly helpful.

[Lord Callanan (Con)]

I referred in my earlier speech to the need to make regulations setting the maximum penalty, which the Secretary of State will do, but I will write to my noble friend if there are any other examples of regulations that we feel we may need to make.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

Does the noble Baroness, Lady Bowles, wish to respond to any of the points made?

[Baroness Bowles of Berkhamsted (LD) [V]]

Yes. My Lords, I thank all noble Lords who have spoken in this debate; I think that it will be even more interesting when we read it in Hansard.

I think that there is still a sticking point, which was exemplified by one of the Minister’s comments. He said that he did not want there to be disparity between procedures in the CMA. The point that I have been making, which seems to have been supported by all the speakers in this debate, is that they are for different things. The noble Lord, Lord Tyrie, acknowledged that it was for a different purpose. My noble friend Lord Fox referred to people being recalcitrant rather than doing nothing. I was trying to say that, within competition policy, the Government are pursuing miscreants, but they are pursuing innocent people for information. In fact, at the beginning of his response, the Minister said that the purpose is to gain the assistance of third parties. That was the first time I had heard a reasonable word about this. The Government are asking the private sector to give assistance. They can go to the devolved Administrations but there is complete asymmetry: the Government cannot fine them but people who find it too difficult to give assistance are at risk of a fine.

Of course we expect reasonable behaviour, but we do not always get it. I point to that wonderful machinery of HMRC on loan charges and ask whether we have evidence that we always get reasonableness where we want it. I am not yet satisfied. There have been some interesting suggestions about reviewing how it has gone, that we can have sight of the regulations, or that we can examine procedures that are likely to be implemented. Surely we could do some of these things between now and Report.

I still think that where we are essentially sampling and wanting views from people in the market, the burden is on the sampler, not the samplee. This is therefore a matter I wish to return to on Report, but I hope it is something we can solve. On Monday on our first group, people said that patent attorneys were vital for the country, so I had a smile on my face. Maybe now noble Lords actually know where I learned to be a nerdy pedant.

The point is that we have to have protections in the Bill where, if something unjust happens, somebody can say, “Hang on a minute, look, it says here that that excuse was reasonable,” or, “You can’t make me do this because I haven’t done anything wrong.” You cannot go around arresting people without reasonable suspicion. I do not think we should fine people without reasonable suspicion that something wrong was done in the first place. We cannot just invent a wrongness by saying, “I wanted you to give me some information and you said no”, which is basically what the powers in the Bill do.

I thank noble Lords. I look forward to a letter with some more answers to my questions from the Minister. I do not think there is anything to withdraw because this is a stand part debate, but obviously I will not call a vote.

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Clause 40 agreed.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

We now come to the group consisting of Amendment 153. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this amendment to a Division should make that clear in debate.

Amendment 153

Moved by