Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Baroness Kidron (CB)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick. I declare my interest as set out in the register as adviser to the Institute for Ethics in AI at Oxford and the Digital Futures Commission at LSE, and chair of 5Rights Foundation.

Like other noble Lords, I welcome the Bill. I can claim to be an enthusiastic advocate for democratic oversight of the power of tech, corporations, their products and services and the externalities on society. While my primary focus is on the detail of the regulatory regime brought forward by the Online Safety Act and the opportunities and problems of the upcoming Data Protection and Digital Information Bill, this Bill represents an enormously important piece of the puzzle of digital regulation. I hope that the Minister has recognised the warm glow of agreement across the House, which we put to such good effect during the passage of the then Online Safety Bill, and that we will have a similar outcome during the passage of this Bill.

One aspect of working on digital regulation is that however fundamental it is to the lives and outcomes of UK citizens, its importance is often obscured by language and concepts that very few people engage with—holdover computer power, large or specialist datasets, automated decisions, synthetic information and so on. It means that debates like the one we are having today and the public discourse outside your Lordships’ House are confined to small interest groups. Yet I am often struck by the number of times somebody raises with me the feeling of being forced into using certain products; the fierce hold over small business by the app stores and search; the powerlessness of creators; or the ubiquity and damage that fake reviews do to both legitimate businesses and unsuspecting consumers. Or they simply express the idea that the deal they thought they had made is not the deal they got.

Any concentration of power is disfiguring of democratic societies and ultimately consumers come to feel that asymmetry of power, even if they cannot speak to it. The concentration of market power in the digital marketplace is no different. Here, I want to make it utterly clear that the tech lobby move to make consumer benefit the paramount criterion for exercising DMU judgment must be looked at in detail in Committee. Consumers often have long-term interests that are vastly different to the shiny, superficial, short-term consumer gains so often trumpeted by the sector.

Before the Government published their amendments on Report in the other place, I was asked what I thought of the Bill by someone rather senior. I replied, somewhat jokingly, that it depended almost entirely on how successful the tech sector lobbying over the summer had been. That is about the size of it. What the Government put forward was a thoughtful and robust legislative proposal which sought to deploy greater nuance than similar proposals in other jurisdictions. Happily, while the worst of the lobbying has not materialised in the Bill, I am afraid that it remains the case that, were the Government to hold firm and to set the final bar closer to where it was before Report, it would be rather better for it. I will quote the noble Baroness, Lady Stowell, who wrote in an article in the Times—rather brilliantly:

“This is a bill the government got right the first time, it must not now second-guess itself”.


Today, I want to briefly raise a number of points that I am sure we will look at in great detail in Committee. Many of them have been raised by others, so I will try to do so quickly. Over the last decade, I have repeatedly seen regulators going toe to toe with companies with seemingly unlimited resources and falling back on “advising”, “working with” and “taking on only the winnable action”. The Bill as it stands enforces many duties on the CMA to consult and consider representations during its work. In the context of litigious companies with limitless cash, this encourages regulators fearing judicial review to consult on what the rules should be, rather than publishing their regime and inviting the sector to raise reasonable concerns. It is the perfect route for regulatory capture, and I am afraid I have seen it elsewhere. We are making the law, and the regulator, not the industry, should interpret Parliament’s intent. I wholly support, and I practise, high engagement with the sector, but a regulator must not be strung up by requirements such as those in Clauses 6, 20, 114 and others.

For the same set of reasons, I trust that the counter- vailing benefits clause, Clause 29, will get the full power of scrutiny from your Lordships’ House. It must not become a corridor by which strategic market status firms can avoid requirements set out in the Bill. It is the statutory duty of the CMA and DMU to promote competition: surely, in the digital context it is those firms that hold the most power that we most want to regulate to allow a rich environment for challenger and growing businesses, as well as consumer benefit.

I strongly support the push from publishers, including small and independent publishers and groups such as the Public Interest News Foundation, for the Bill to be amended to include citizens’ interests to be considered for a competitive, pluralistic press in this country. Such an amendment would align with the advice from the Digital Markets Taskforce, which advised the Government on the regime as the Bill was being developed. I think it would also send a strong and unequivocal signal that your Lordships’ House backs strong, independent journalism.

Like the noble Lord, Lord Fox, I have concerns about the unmet need for collective action, which is a problem across all our digital regulation. Digital is a complex area of law, it is technical to prove wrongdoing and hard for a non-expert to know which law is being broken: data, consumer, harms, IP, privacy and so on. We did not get an adequate redress system in the Online Safety Act and we will undoubtedly discuss it again during the passage of the DPDI Bill, so I ask the Minister whether he is open to discussing this in the round so that we can consider the need for the consumer to be supported across all the regimes. I am glad not to disappoint the noble Baroness, Lady Stowell, because at the same time I would like to revisit the idea of a standing Joint Committee on digital regulation to provide the parliamentary oversight of independent regulation which the pre-legislative committee suggested during the passage of the Online Safety Act.

Finally, I was going to mention the full merits appeal, but I thought the noble Lord, Lord Vaizey, spoke so beautifully on that, as did the noble Lord, Lord Lansley, and the noble Baroness, Lady Stowell, that I shall just associate myself with their words and say that I very much look forward to working with noble Lords across the House on the Bill and that I have learned a great deal during this debate.

Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Baroness Kidron (CB)]

My Lords, I too faced a glitch, having wanted to add my name to these amendments. Since we are at a new stage of the Bill, I declare my interests as set out in the register, particularly as an adviser to the Institute for Ethics in AI at Oxford and to the Digital Futures centre at the LSE and as chair of the 5Rights Foundation. I support the noble Lord, Lord Clement-Jones, who has, with this group of amendments, highlighted that job creation or displacement and the quality of work are all relevant considerations for the CMA. I think it is worth saying that, when we talk about the existential threat of AI, we always have three areas of concern. The first is the veracity and provenance of information; the second is losing control of automated weapons; and the third, importantly in this case, is the many millions of jobs that will be lost, leaving human beings without ways to earn money or, perhaps, a reason for being.

There are two prevailing views on this. One is that of Elon Musk, who, without telling us how we might put food on the table, pronounced to the Prime Minister

“There will come a point where no job is needed – you can have a job if you want one for personal satisfaction but AI will do everything”.


The other, more optimistic view is that boring or repetitive work will go, which is, in part, beautifully illustrated by David Runciman’s recent book, The Handover, where he details the fate of sports officials. In 2021, Australian and US line judges were replaced by computers, while Wimbledon chose to keep them—largely for aesthetic reasons, because of the lovely Ralph Lauren white against the green grass. Meanwhile, Carl Frey and Michael Osborne, in their much-publicised 2017 study assessing the susceptibility of 702 different jobs to computerisation, suggested that sports officials had a 98% probability of being computerised.

In fact, since 2017, automation has come to all kinds of sports but, as Runciman says,

“Cricket matches, which traditionally featured just two umpires, currently have three to manage the complex demands of the technology, plus a referee to monitor the players’ behaviour”.


Soccer has five, plus large teams of screen watchers needed to interpret—very often badly—replays provided by VAR. The NBA Replay Center in Secaucus employs 25 people in a NASA-like control room, along with a rota of regular match officials.

It would be a fool who would bet that Elon Musk is entirely wrong, but nor should we rely on the fact that all sectors will employ humans to watch over the machines, or even that human beings will find that being the supervisor of a machine, or simply making an aesthetic contribution rather than being a decision-maker, is a good result. It is more likely that the noble Lord, Lord Knight, is correct that the algorithm will indeed be supervising the human beings.

I believe that the noble Lord, Lord Clement-Jones, and his co-author, the noble Lord, Lord Knight, may well prove to be very prescient in introducing this group of amendments that thoughtfully suggest at every stage of the Bill that the CMA should take the future of work and the impact of work into account in coming to a decision. As the noble Lord made clear in setting out each amendment, digital work is no longer simply gig work and the concentration in digital markets of behemoth companies has had and will continue to have huge consequences for jobs across supply lines, as well as wages within markets and, most particularly, on terms of employment and access to work.

AI is, without question, the next disruptor. Those companies that own the technology will be dominant across multiple markets, if not every market, and for the CMA to have a mandate to consider the impact on the workforce is more than sensible, more than foresightful; it is in fact a new reality. I note that the Minister, in responding to the last group, mentioned the importance of foreseeable and existing trends: here we have one.

[Viscount Camrose (Con)]

My Lords—

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I simply make the point to the Minister that, if the Government have the opportunity to think between Committee and Report how they might find a way to level the playing field and amend the legislation accordingly, it would be welcomed across all sides of the House.

[Baroness Kidron (CB)]

My Lords, I do not actually have much to add to the excellent case that has already been made, but I, too, was at the meeting that the noble Baroness, Lady Jones of Whitchurch, mentioned, and noticed the CMA’s existing relationships.

Quite a lot has been said already, on the first group and just now, about lobbying—not lobbying only in a nasty sense but perhaps about the development of relationships that are simply human. I want to make it very clear that those words do not apply to the CMA specifically—but I have worked with many regulators, both here and abroad, and it starts with a feeling that the regulated, not the regulator, holds the information. It goes on to a feeling that the regulated, not the regulator, has the profound understanding of the limits of what is possible. It then progresses to a working relationship in which the regulator, with its limited resources, starts to weigh up what it can win, rather than what it should demand. That results in communities that have actually won legal protections remaining unprotected. It is a sort of triangulation of purpose, in which the regulator’s primary relationship ends up being geared towards government and industry, rather than towards the community that it is constituted to serve.

In that picture, I feel that the amendments in the name of the noble Baroness, Lady Jones of Whitchurch, make it clear, individually and collectively, that at every stage maximum transparency must be observed, and that the incumbents should be prevented from holding all the cards—including by hiding information from the regulator or from other stakeholders who might benefit from it.

I suggest that the amendments do not solve the problem of lobbying or obfuscation, but they incentivise providing information and they give challengers a little bit more of a chance. I am sure we are going to say again and again in Committee that information is power. It is innovation power, political power and market power. I feel passionately that these are technical, housekeeping amendments rather than ones that require any change of government policy.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Kidron, whose speech segues straight into my Amendments 14 and 63. This is all about the asymmetry of information. On the one hand, the amendments from the noble Baroness, Lady Jones, which I strongly support and have signed, are about giving information to challengers, whereas my amendments are about extracting information from SMS undertakings.

Failure to respond to a request for information allows SMS players to benefit from the information asymmetry that exists in all technology markets. Frankly, incumbents know much more about how things work than the regulators. They can delay, obfuscate, claim compliance while not fully complying and so on. By contrast, if they cannot proceed unless they have supplied full information, their incentives are changed. They have an incentive to fully inform, if they get a benefit from doing so. That is why merger control works so well and quickly, as the merger is suspended pending provision of full information and competition authority oversight. We saw that with the Activision Blizzard case, where I was extremely supportive of what the CMA did—in many ways, it played a blinder, as was subsequently shown.

We on these Benches consider that a duty to fully inform is needed in the Bill, which is the reason for our Amendments 14 and 63. They insert a new clause in Chapter 2, which provides for a duty to disclose to the CMA

“a relevant digital activity that may give rise to actual or likely detrimental impact on competition in advance of such digital activity’s implementation or effect”

and a related duty in Chapter 6 ensuring that that undertaking

“has an overriding duty to ensure that all information provided to the CMA is full, accurate and complete”.

Under Amendment 14, any SMS undertaking wishing to rely on it must be required to both fully inform and pre-notify the CMA of any conduct that risks breaching one of the Bill’s objectives in Clause 19. This is similar to the tried-and-tested pre-notification process for mergers and avoids the reality that the SMS player may otherwise simply implement changes and ignore the CMA’s requests. A narrow pre-notification system such as this avoids the risks.

We fully support and have signed the amendments tabled by the noble Baroness, Lady Jones. As techUK says, one of the benefits that wider market participants see from the UK’s pro-competition regime is that the CMA will initiate and design remedies based on the evidence it gathers from SMS firms in the wider market. This is one of the main advantages of the UK’s pro-competition regime over the EU DMA. To achieve this, we need to make consultation rights equal for all parties. Under the Bill currently, firms with SMS status, as the noble Baroness, Lady Harding, said, will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. As she and the noble Lord, Lord Vaizey, said, there are opportunities for SMS firms to comment at the outset but none for challenger firms, which can comment only at a later public consultation stage.

It is very important that there are clear consultation and evidence-gathering requirements for the CMA, which must ensure that it works fairly with SMS firms, challengers, smaller firms and consumers throughout the process, ensuring that the design of conduct requirements applies to SMS firms and pro-competition interventions consider evidence from all sides, allowing interventions to be targeted and capable of delivering effective outcomes. This kind of engagement will be vital to ensuring that the regime can meet its objectives.

We do not believe that addressing this risk requires removing the flexibility given by the Bill. Instead, we believe that it is essential that third parties are given a high degree of transparency and input on deliberation between the CMA and SMS firms. The CMA must also—and I think this touches on something referred to by the noble Baroness, Lady Jones—allow evidence to be submitted in confidence, as well as engage in wider public consultations where appropriate. We very strongly support the amendments.

On the amendments from the noble Lord, Lord Tyrie, it is a bit of a curate’s egg. I support Amendments 12A and 12B because I can see the sense in them. I do not see that we need to have another way of marking the CMA’s homework, however. I am a great believer that we need greater oversight, and we have amendments later in the Bill for proposals to increase parliamentary oversight of what the CMA is doing. However, marking the CMA’s homework at that stage is only going to be an impediment. It will be for the benefit of the SMS undertakings and not necessarily for those who wish to challenge the power of those undertakings. I am only 50% with the noble Lord, rather than the whole hog.

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[Lord Clement-Jones (LD)]

My Lords, all the SMS has to do is put it through one of its large language models, and hey presto.

[Baroness Kidron (CB)]

I am losing track of the conversation because I thought we were asking for more information for the challenger companies. rather than this debate between the SMS and the regulator. Both of them are, I hope, well resourced, but the challenger companies have somehow been left out of this equation and I feel that we are trying to get them into the equation in an appropriate way.

[Lord Clement-Jones (LD)]

That is not incompatible. These are two sides of the same coin, which is why they are in this group. I suppose we could have degrouped it.

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[Baroness Harding of Winscombe (Con)]

My Lords, I shall also discuss the leveraging or whack-a-mole provisions. Perhaps Conservative Peers today are London buses: this is the fourth London bus to make the same point. I too would have added my name to my noble friend Lord Vaizey’s amendment had I been organised enough.

I shall make a couple of points. The noble Lord, Lord Tyrie, said earlier that we are all here on the Bill because harm has already been done. If noble Lords will forgive me, I will tell a little story. In 2012, I went on a customer trip to Mountain View, Google’s headquarters in California, as the chief executive of TalkTalk. We were in the early days of digital advertising and TalkTalk was one of its biggest customers. A whole group of customers went on what people now call a digital safari to visit California and see these tech companies in action.

I will never forget that the sales director left us for a bit for a demo from some engineers from head office in Mountain View, from Google, who demoed a new functionality they were working on to enable you to easily access price comparisons for flights. It was an interesting demo because some of the other big customers of Google search at the time were independent flight search websites, whose chief executives had been flown out by Google to see all the new innovation. The blood drained from their faces as this very well-meaning engineer described and demoed the new functionality and explained how, because Google controlled the page, it would be able to promote its flight search functionality to the top of the page and demote the companies represented in the room. When the sales director returned, it was, shall we say, quite interesting,

I tell that tale because there are many examples of these platforms leveraging the power of their platform to enter adjacent markets. As my noble friend has said, that gets to the core of the Bill and how important it is that the CMA is able to impose conduct requirements without needing to go through the whole SMS designation process all over again.

I know that the tech firms’ counterargument to this is that it is important that they have the freedom to innovate, and that for a number of them this would somehow create “a regulatory requirement to seek permission to innovate”. I want to counter that: we want all companies in this space to have the freedom to innovate, but they should not have the freedom to prioritise their innovation on their monopoly platform over other people’s innovation. That is why we have to get a definition of the leveraging principle, or the whack-a-mole principle, right. As with almost all the amendments we have discussed today, I am not particularly wedded to the specific wording, but I do not think that the Bill as it is currently drafted captures this clearly enough, and Amendments 25, 26, and 27 get us much closer to where we need to be.

I, too, add my voice in support my noble friend Lord Lansley’s amendments. I must apologise for not having studied them properly in advance of today, but my noble friend introduced them so eloquently that it is very clear that we need to put data clearly in the Bill.

Finally, as a member of my noble friend’s Communications and Digital Committee, I, too, listened very carefully to the comments made by the noble Lord, Lord Clement-Jones, about copyright. I feel this is a very big issue. Whether this is the right place to address it, I do not know, but I am sure he is right that we need to address it somehow.

[Baroness Kidron (CB)]

My Lords, I am sorry to break the Conservative bus pattern but I, too, will speak to Amendments 26 and 27, to which I have added my name, and to Amendment 30. Before I do, I was very taken by the amendments spoken to by the noble Lord, Lord Lansley, and I support them. I feel somewhat sheepish that I had not seen the relationship between data and the Bill, having spent most of the past few months with my head in the data Bill. That connection is hugely important, and I am very grateful to the noble Lord for making such a clear case. In supporting Amendments 26 and 27, I recognise the value of Amendment 25, tabled by the noble Lord, Lord Vaizey, and put on record my support for the noble Lord, Lord Holmes, on Amendment 24. So much has been said that we have managed to change the name of the leveraging principle to the whack-a-mole principle and everything that has been said has been said very well.

The only point I want to make on these two amendments, apart from to echo the profound importance that other noble Lords have already spoken of, is that the ingenuity of the sector has always struck me as being equally divided between its incredible creativity in creating new products and things for us to do and services that it can provide, and an equal ingenuity in avoiding regulation of all kinds in all parts of the world. Without having not only the designated activity but the activities the sector controls that are adjacent to the activity, we do not have the core purpose of the Bill. At one point I thought it might help the Minister to see that the argument he made in relation to Clause 6(2) and (3), which was in defence of some flexibility for the Secretary of State, might equally be made on behalf of the regulator in this case.

Turning briefly to Amendment 30 in the name of the noble Lord, Lord Clement-Jones, I first have to make a slightly unusual declaration in that my husband was one of the Hollywood writers who went on strike and won a historic settlement to be a human being in charge of their AI rather than at the behest of the AI. Not only in the creative industries but in academia, I have seen first-hand the impact of scraping information. Not only is the life’s work of an academic taken without permission, but then regurgitating it as an inaccurate mere guess undermines the very purpose of academic distinctions. There is clearly a copyright issue that requires an ability both to opt out and correct, and to share in the upside, as the noble Lord pointed out.

I suggest that the LLMs and general AI firms have taken the axiom “it’s better to ask forgiveness than permission” to unbelievable new heights. Our role during the passage of this Bill may be to turn that around and say that it is better to ask permission than forgiveness.

[Baroness Jones of Whitchurch (Lab)]

My Lords, we have had a wonderfully eclectic debate. I am sorry if we gave some of the amendments more attention than others, because we have a number of very important issues here. Even in my response I may not be giving some colleagues due deference for their hard work and the good arguments they have put forward.

As noble Lords have commented, Amendments 26, 27 and 34 are in my name. As we have discussed, Amendments 26 and 27 would ensure that the CMA can tackle anti-competitive conduct in non-designated activity, provided that this conduct is related to designated activity. This would ensure, for example, that a designated company facing conduct requirements could not simply shift the resources of its business into another similar business venture, which would have a similar outcome of anti-competitive behaviour.

I am very grateful to the noble Baroness, Lady Stowell, for her support. The example she gave of Apple resonates with all of us and has obviously been in the news. It was one of the behaviours I described as rather vindictive in the last debate. I am not sure how much extra money Apple is going to make from it, but it is a question of rubbing someone’s nose in it because you do not like the decision that has been made. I feel that we need to address this issue.

The noble Lord, Lord Vaizey, in his Amendment 25, made a very similar point about the leveraging principle. We have all signed up to “the whack-a-mole principle”; I think we will call it that from now on. As the noble Baroness, Lady Harding, made clear, this is about addressing the leveraging of SMS markets to enter adjoining markets. She gave the example of travel price comparison. I feel that is a lazy innovation; if you get so big, you stop innovating—you copy the competing firms and taking their best ideas without innovating any more. It is in all our interests to get a grip on this, so that these companies that have great resources and great capacity for innovation innovate in a creative way rather than just copying other people’s ideas.

Amendment 34, which is also in our names, would enable the CMA to keep conduct requirements under review and take account of whether those requirements are having their intended effects or if further steps of pro-competition intervention is necessary. It would provide a clearer link between the measures available to the CMA. As the noble Lord, Lord Clement-Jones, and others have said, it underpins the importance of interoperability in CMA decisions. We believe that the amendments help to clarify and reinforce the powers available to the CMA.

I listened carefully to the noble Lord, Lord Holmes, who, as ever, provided enormous insight into the tech world and the consequences of the legislation. We share his objective of getting the powers of the CMA in the right balance. His amendment challenges the Government to explain why the CMA can only impose a conduct requirement to achieve the fair dealing, open choice or trust and transparency objectives—which seems to be overly restrictive and open to legal challenge. We look forward to hearing the Minister’s explanation of why those restrictions were felt necessary. The noble Lord, Lord Holmes, also raised an important point in his Amendment 24, which we have not given sufficient weight to, about the need for those conduct requirements to deliver proper accessibility in line with previous legislation. We absolutely support him in that quest.

The amendments from the noble Lords, Lord Clement-Jones and Lord Lansley, raise important points about transparency and improved data. They stress the importance of portability and interoperability and put data firmly into the conduct requirements. We support those arguments and look forward to the Minister’s response to what we feel are common-sense proposals.

Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Baroness Kidron (CB)]

My Lords, I have had a number of arguments about “proportionate” in the decade that I have been in this House. In fact, I remember that the very first time I walked into the Chamber the noble Lord, Lord Pannick, was having a serious argument with another noble Lord over a particular word. It went on for about 40 minutes and I remember thinking, “There is no place for me in this House”. Ten years later, I stand to talk about “proportionate”, which has played such a big part in my time here in the Lords.

During the passage of the DPA 2018, many of us tried to get “proportionate” into the Bill on the basis that we were trying to give comfort to people who thought data protection was in fact government surveillance of individuals. The Government said—quite rightly, as it turned out—that all regulators have to be

“proportionate, accountable, consistent, transparent, and targeted”

in the way in which they discharge their responsibilities and they pushed us back. The same thing happened on the age-appropriate design code with the ICO, and the same point was made again. As the noble Baroness, Lady Harding, just set out, we tried once more during the passage of the Online Safety Bill. Yet this morning I read this sentence in some draft consultation documents coming out of the Online Safety Act:

“Provisionally, we consider that a measure recommending that users that share CSAM”—


that is, for the uninitiated, child sexual abuse material—

“have their accounts blocked may be proportionate, given the severity of the harm. We need to do more work to develop the detail of any such measure and therefore aim to consult on it”.

This is a way in which “proportionate” has been weaponised in favour of the tech companies in one environment and it is what I am concerned about here.

As the noble Lord said, using “proportionate” introduces a gap in which uncertainty can be created, because some things are beyond question and must be considered, rather than considered on a proportionate basis. I finish by saying that associating the word specifically in relation to conduct requirements or making pro-competitive interventions must create a legal uncertainty if a regulator can pick up that word and put it against something so absolute and illegal and then have to discuss its proportionality.

[Lord Vaizey of Didcot (Con)]

I wonder if I can just slip in before Members on the Front Bench speak, particularly those who have signed the amendment. I refer again to my register of interests.

I support the principle that lies behind these amendments and want to reinforce the point that I made at Second Reading and that I sort of made on the first day in Committee. Any stray word in the Bill when enacted will be used by those with the deepest pockets—that is, the platforms—to hold up action against them by the regulator. I read this morning that the CMA has resumed its inquiry into the UK cloud market after an eight-month hiatus based on a legal argument put by Apple about the nature of the investigation.

It seems to me that Clause 19(5) is there to show the parameters on which the CMA can impose an obligation to do with fair dealing and open choices, and so on. It therefore seems that “proportionate”—or indeed perhaps even “appropriate”—is unnecessary because the CMA will be subject to judicial review on common-law principles if it makes an irrational or excessive decision and it may be subject to a legal appeal if people can argue that it has not applied the remedy within the parameters set by paragraphs (a), (b) and (c) of Clause 19(5). I am particularly concerned about whether there is anything in the Bill once enacted that allows either some uncertainty, which can be latched on to, or appeals—people refer to “judicial review plus” or appeals on the full merits, which are far more time-consuming and expensive and which will tie the regulator up in knots.

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[Viscount Colville of Culross (CB)]

If “indispensable” and purely “benefit” are the same, why was the change made on Report in the Commons?

[Baroness Kidron (CB)]

I was really interested in the introduction of the word “unknown”. The noble Lord, Lord Lansley, set out all the different stages and interactions. Does it not incentivise the companies to call back information to this very last stage, and the whole need-for-speed issue then comes into play?

[Viscount Camrose (Con)]

I will revert first to the questions about the word “indispensable”. As I have said, the Government consulted very widely, and one of the findings of the consultation was that, for a variety of stakeholders, the word “indispensable” reduced the clarity of the legislation.

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[Viscount Camrose (Con)]

I cannot give a full account of the individual stakeholders right now; I am happy to ask the department to clarify further in that area. My contention is that the effect of the two sentences are the same, with the new one being clearer than the old one. I am very happy to continue to look at that and listen to the arguments of noble Lords, but that is the position. Personally, when I look at the two sentences, I find it very difficult to discern any difference in meaning between them. As I say, I am very happy to receive further arguments on that.

With respect to the participative arrangements by which a decision is reached around, for example, a conduct requirement, during the period of conduct requirement design, and during the decision-making period, it is, as my noble friend Lord Lansley has stated, highly to be expected that firms will make representations about the consumer benefits of their product. During a breach investigation, on the other hand, later on in the process, a consumer benefits exemption can be used as a safeguard or defence against a finding of breach.

Sorry, but there were so many questions that I have completely lost track. Perhaps the noble Baroness, Lady Kidron, will restate her question.

[Baroness Kidron (CB)]

I think the Minister was in the middle of answering it and saying why something might be “unknown” right at the last.

[Viscount Camrose (Con)]

As many noble Lords in the debate have alluded to, we have to be clear that this is a fast-moving field, and we have to at least allow for the possibility that new technologies can provide new consumer benefits and that it is okay to argue that a new and emerging technology that was not part of the original consideration can be considered as part of the defence against a finding of breach. The fact that the intended meaning is intended to be clearer in the current drafting is aiming to provide greater certainty to all businesses while ensuring that consumers continue to get the best outcomes.

Amendment 41, from the noble Lord, Lord Clement-Jones, would change the current drafting of the countervailing benefits exemption in several ways that together are intended to ensure that the CMA is provided as soon as possible with information relating to an SMS firm’s intention to rely on the exemption. We agree with noble Lords who have spoken today that it is important that the exemption cannot be used to avoid or delay enforcement action. The conduct investigation will operate in parallel to the assessment of whether the exemption applies, meaning that the investigation deadline of six months is not affected by the exemption process. The regime has been designed to encourage an open dialogue between the CMA and SMS firms, helping to avoid delays, unintended consequences and surprises on all sides. Therefore, in many cases, if a firm intends to rely on the exemption, we anticipate that this will be clear to all parties from early on in the process.

Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

These are modest amendments, and I ask that the CMA and the DRCF can engage with other regulators, as they now say they want to. If the Minister or his ministerial colleagues do not think that we have got the wording right but want to work with me to find a different way of achieving the same effect, I am of course happy to meet with him to discuss the best way forward. But, for now, I beg to move.

[Baroness Kidron (CB)]

The noble Lord, Lord Knight, has said so much of my speech that I will be very rapid. There are two points to make here. One is that regulatory co-operation is a theme in every digital Bill. We spent a long time on it during the passage of the Online Safety Act, we will do it again in the Data Protection and Digital Information Bill, and here it is again. As the noble Lord, Lord Knight, said, if the wording or the approach is not right, that does not matter, but any move to bring regulators together is a good thing.

The second point, which may come up again in amendments in a later group that looks at citizens, is that it is increasingly hard to understand what a user, a worker or a citizen is in this complicated digital system. As digital companies have both responsibilities and powers across these different themes, it is important, as I argued last week, to ensure that workers are not forgotten in this picture.

[Baroness Harding of Winscombe (Con)]

My Lords, it is with great trepidation that I rise to speak to these amendments because, I think for the first time in my brief parliamentary career, I am not complete ad idem with the noble Lord, Lord Knight, and the noble Baroness, Lady Kidron, on digital issues where normally we work together. I hope they will forgive me for not having shared some of my concerns with them in advance.

I kicked myself for not saying this last week, so I am extremely grateful that they have brought the issue back this week for a second run round. My slight concern is that history is littered with countries trying to stop innovation, whether we go back to the Elizabethans trying to stop looms for hand knitters or to German boatmen sinking the first steamboat as it went down the Rhine. We must be very careful that in the Bill we do not encourage the CMA to act in such a way that it stops the rude competition that will drive the innovation that will lead to growth and technology. I do not for a moment think that the noble Lord or the noble Baroness think that, but we have to be very cautious about it.

We also learn from history that innovation does not affect or benefit everybody equally. As we go through this enormous technology transformation, it is important that as a society we support people who do not necessarily immediately benefit or who might be considerably worse off, but I do not think that responsibility should lie with the CMA. Last week, the noble Lord, Lord Knight, challenged with, “If not in this Bill, where?” and I feel similarly about this amendment. It is right that we want regulators to co-operate more, but it is important that our regulators have very clear accountabilities. Having been a member of the Court of the Bank of England for eight years in my past life, I hate the fact that there are so many that the Bank of England must take note of in its responsibilities. We have to be very careful that we do not create a regime for the CMA whereby it has to take note of a whole set of issues that are really the broad responsibility of government. Where I come back into alignment with the noble Lord, Lord Knight, is that I think it is important that the Government address those issues, just probably not in this Bill.

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[Lord Black of Brentwood (Con)]

My Lords, I want to support Amendment 76, to which I have added my name, with some brief remarks because the noble Viscount, Lord Colville, has put the case with great power and eloquence. I also support Amendment 77 in the name of my noble friend Lady Stowell, which is a clever solution to the issue of accountability.

I support Amendment 76 in particular, both because I do not believe the requirement is necessary and because—this is a consistent theme in our Committee debates—it builds into the legislation a completely avoidable delay and poses a very real threat to the rapid enforcement of it. Quite apart from the issues of principle, which are significant, this is also intensely practical. The CMA’s guidance on the Bill, published earlier this month, set out the expected timetable for the consultation phase on the Bill’s implementation, running through to October 2024, which could be a very busy month. It is almost certainly when we will have a general election or be in the midst of one.

It seems highly unlikely that the Secretary of State will be able to approve guidance during the purdah of an election campaign and if, after the election—whoever wins it—we have a new Secretary of State, there will inevitably be a further delay while he or she considers the guidance before approving it. The Bill therefore ought to be amended to remove the requirement for the Secretary of State’s approval, or, at the very least, set a strict timetable for it, such as the draft guidance being automatically approved after 30 days unless it is specifically rejected. That would ensure that there is not unnecessary delay, which could run into many months, before the new regime takes effect—especially if there is, as a number of noble Lords have made clear, intense lobbying of the Secretary of State behind the scenes.

[Baroness Kidron (CB)]

My Lords, I support both amendments in this group. This seems to be fundamentally a question of what happens in private and what happens in public. I was struck by the number of exchanges in the second day in Committee last week in which noble Lords raised the asymmetry of power between the regulator and the companies that may be designated SMS. The right reverend Prelate the Bishop of Manchester said,

“let us get this right so that Davids have a chance amid the Goliaths”.—[Official Report, 24/1/24; col. GC 230.]

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[Baroness Stowell of Beeston (Con)]

I urge the noble Baroness to stay for the debate on the next group of amendments, in which we will talk about parliamentary accountability. I think she will find that the committee I am proposing is perhaps not quite as modest as she has just described it.

[Baroness Kidron (CB)]

Indeed.

[Baroness Harding of Winscombe (Con)]

My Lords, I promise I will speak briefly to associate myself with the remarks of my noble friend Lady Stowell and support her Amendment 77 and Amendment 76 in the name of the noble Viscount, Lord Colville.

Despite the fact that there are fewer of us here than there have been in the debates on some of the other quite contentious issues, this is an extremely important amendment and a really important principle that we need to change in the Bill. To be honest, I thought that the power granted to the Secretary of State here was so egregious that it had to have been inserted as part of a cunning concession strategy to distract us from some of the other more subtle increases in powers that were included in the other place. It is extremely dangerous, both politically and technocratically, to put an individual Secretary of State in this position. I challenge any serious parliamentarian or politician to want to put themselves in that place, as my noble friend Lady Stowell said.

On its own, granting the Secretary of State this power will expose them to an enormous amount of lobbying; it is absolutely a lobbyist’s charter. This is about transparency, as the noble Baroness, Lady Kidron, said, and parliamentary scrutiny, which we will come to properly in our debate on the next group of amendments. However, it is also about reducing the risk of lobbying from the world’s most powerful institutions that are not Governments.

For those reasons, I have a slight concern. In supporting Amendment 77, I do not want the Government or my noble friend the Minister to think that establishing parliamentary scrutiny while maintaining the Secretary of State’s powers would be a happy compromise. It would be absolutely the wrong place for us to be. We need to remove the Secretary of State’s powers over guidance and establish better parliamentary scrutiny.

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[Baroness Harding of Winscombe (Con)]

My Lords, I will be brief. It is an honour to follow the noble Lord, Lord Fox, and his passionate exposé about the importance of interoperability while reminding us that we should be thinking globally, not just nationally. I did not come expecting to support his amendment but, as a result of that passion, I do.

I rise to support my noble friend Lady Stowell. She set out extremely clearly why stronger parliamentary oversight of the digital regulators is so important. I speak having observed this from all possible angles. I have been the chief executive of a regulated company, I have chaired a regulator, in the form of NHS Improvement, I have been on the board of a regulator, in the form of the Bank of England and I am a member of my noble friend’s committee. I have genuinely seen this from all angles, and it is clear that we need to form a different approach in Parliament to recognise the enormous amounts of power we are passing to the different regulators. Almost all of us in Committee today talked about this when the Online Safety Bill was passing through our House, and it was clear then that we needed to look at this. We have given enormous power to Ofcom in the Online Safety Act; this Bill looks at the CMA and very soon, in this same Room, we will be looking at changing and increasing the powers of the ICO, and if we think that that is it, we have not even begun on what AI is going to do to touch a whole host of regulators. I add my voice to my noble friend’s and congratulate her on the process that she seems to be well advanced in in gathering support not just in this House but in the other place.

I also express some support for Amendment 83. I am concerned that if we are not careful, the easiest way to ensure that the CMA is not bold enough is to not resource it properly. Unlike the passage of the Online Safety Act, where we got to see how far advanced Ofcom was in bringing in genuine experts from the technology and digital sector, it has not yet been so obvious as this Bill has progressed. That may be just because of the stage we are at, but I suspect it is also because the resourcing is not yet done in the CMA. Therefore, I ask the Minister for not so much an annual update as a current update on where the CMA is in resourcing and what support the Government are giving it to ensure it is able to meet a timetable that still looks painfully slow for this Bill.

[Baroness Kidron (CB)]

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

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

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

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

[Lord Tyrie (Non-Afl)]

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

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

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

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

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

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

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

Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

[Lord Tyrie (Non-Afl)]

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

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

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

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

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

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

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

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

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

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

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

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

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

[Baroness Kidron (CB)]

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

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

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[Lord Tyrie (Non-Afl)]

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

[Baroness Kidron (CB)]

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

[Viscount Camrose (Con)]

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

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

Digital Markets, Competition and Consumers Bill

Baroness Kidron Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

[Lord Black of Brentwood (Con)]

My Lords, I declare my interest as deputy chair of the Telegraph Media Group and my other interests as set out in the register. I will focus briefly on three crucial amendments in this group—on proportionality, the appeals standard, and the Secretary of State’s powers—echoing points that have already been made strongly in this debate.

I fully support Amendments 13 and 35 in the name of the noble Lord, Lord Faulks. The amendment made to the Bill in the Commons replacing “appropriate” with “proportionate” will significantly expand the scope for SMS firms to appeal the CMA’s decision to create conduct requirements and initiate pro-competitive interventions.

As we have already heard, the Government have sought to argue that, even absent the “proportionality” wording, in most cases the SMS firms will be able to argue that their ECHR rights will be engaged, therefore allowing them to appeal on the basis of proportionality. The question arises: why then introduce the “proportionality” standard for intervention at all, particularly when the CMA has never had the scope to act disproportionately at law?

In this context, it is clear that the main potential impact of the Bill as it now stands is that a court may believe that Parliament was seeking to create a new, heightened standard of judicial review. As the Government have rightly chosen to retain judicial review as the standard of appeals for regulatory decisions in Part 1, they should ensure that this decision is not undermined by giving big tech the scope to launch expensive, lengthy legal cases. All experience suggests that that is exactly what would happen by it arguing that the Government have sought to create a new, expansive iteration of JR. I fear that, if the amendments from the noble Lord, Lord Faulks, are not adopted, we may find in a few years’ time that we introduced full merits reviews by the back door, totally undermining the purpose of this Act.

Amendments 43, 44, 46, 51 and 52 in the name of the noble Baroness, Lady Jones, are also concerned with ensuring that we do not allow full merits appeals to undermine the CMA’s ability to regulate fast-moving digital markets. Even though full merits are confined to penalty decisions, financial penalties are, after all, as we have heard, the ultimate incentive to comply with the CMA’s requirements. We know that the Government want this to be a collaborative regime but, without there being a real prospect of meaningful financial penalties, an SMS firm will have little reason to engage with the CMA. Therefore, there seems little logic in making it easier for SMS firms to delay and frustrate the imposition of penalties.

There is also a danger that full merits appeals of penalty decisions will bleed back into regulatory decisions. The giant tech platforms will undoubtedly seek to argue that a finding of a breach of a conduct requirement, and the CMA’s consideration that an undertaking has failed to comply with a conduct requirement when issuing a penalty, are both fundamentally concerned with the same decision: “the imposition” of a penalty, with the common factor being a finding that a conduct requirement has been breached. The cleanest way to deal with this is to reinstate the merits appeals for all digital markets decisions. That is why, if the noble Baroness, Lady Jones, presses her amendments, I will support them.

Finally, I strongly support Amendment 56 in the name of my noble friend Lord Lansley, which would ensure that the Secretary of State must approve CMA guidance within a 40-day deadline. This would allow the Government to retain oversight of the pro-competition regime’s operations, while also ensuring that the operationalisation of the regime is not unduly delayed. It will also be important in ensuring that updates to the guidance are made promptly; such updates are bound to be necessary to iron out unforeseen snags or to react to rapidly developing digital markets. Absent a deadline for approval, there is a possibility that the regulation of big tech firms will grind to a halt mid-stream. That would be a disaster for a sector in which new technologies and business models are developed almost daily. I strongly support my noble friend and will back him if he presses his amendment to a vote.

With the deadline to comply with the Digital Markets Act in Europe passing only last week, big tech’s machinations in the EU have provided us with a window into our future if we do not make this legislation watertight. As one noble Lord said in Committee—I think it was the noble Lord, Lord Tyrie—we do not need a crystal ball when we can read the book. We have the book, and we do not like what we see in it. We must ensure that firms with an incredibly valuable monopoly to defend and limitless legal budgets with which to do so are not able to evade compliance in our own pro-competition regime.

[Baroness Kidron (CB)]

My Lords, I will speak to Amendments 43, 44, 46, 51 and 52, to which I have added my name, and Amendment 59. Before I do, I register my support for Amendments 13 and 35, which were brilliantly set out by my noble friend Lord Faulks and added to by others. I too shall support them if they choose to ask the opinion of the House.

I also support Amendment 56 in the name of the noble Lord, Lord Lansley. I have lived experience of waiting too long for the code to come back from the Secretary of State. Even without being a bad actor, it is in the nature of Secretaries of State to have a burgeoning in-tray, and it is in the nature of codes to be on a subject that politicians have moved on from by the time they arrive. I fully support him, and 40 days seems like a modest ask given the importance of the Bill overall.

I turn to the amendments in the name of the noble Baroness, Lady Jones. I look forward to her setting them out after I have supported them. They would reinstate judicial review as the appeal standard for penalty decisions. I thank the Minister for the generosity of his time; I know he spoke not only to me but to a number of noble Lords. However, the thing I have taken away from discussions with government and during Committee is the persistent drumbeat that asserts that we are giving huge new and untested powers to the CMA. Here, we can fill in as we like: full merits on penalty, countervailing benefits, proportionality, and Secretary of State powers have been introduced simply to give a little balance. I find that unacceptable given the power of the companies and the asymmetry we are trying to address.

The reality is that the powers given to the CMA, while much needed, are dwarfed by the power of the companies they seek to regulate. The resources available to the CMA, while welcome, are dwarfed by the resources available to a single brand of a single SMS. Most of all, the CMA’s experience of regulating digital companies is dwarfed by the experience of digital companies in dodging regulation. I am struggling to understand the imbalance of power that the Government are seeking to address.

I was in Brussels on Wednesday last week and there is a certain regret about the balancing that the EU allowed to the DMA in face of the tech lobby, only to see Apple, TikTok and Meta gleefully heading to the courts and snarling up the possibility of being regulated as intended for many years—or perhaps at all. This issue was raised by the noble Lord, Lord Black. Adding a full merits appeal on penalty will embolden the sector to use the threat of appeal to negotiate their position at earlier points in the process. It will undermine the regulator’s strength in coming to a decision. Very possibly, as other noble Lords have said, it could bleed backwards into areas of compliance and conduct requirements. It is, as the noble Baroness, Lady Harding, said, creating a hole for water to get in. The companies lobbied furiously for full merits on penalties. This is not an administrative point; it goes to the heart of the regime. Full merits give the regulated leverage over the regulator.

The most straightforward way of ensuring that the regulator does not abuse its new, enhanced power, as the Government appear to fear, is to make it accountable to Parliament, as the noble Baroness, Lady Stowell, set out in full, repeatedly and with great eloquence. I am sorry that we will not have an opportunity to make our feelings on that issue felt today, but I strongly support her saying that we should not drop this issue just because it is inconvenient to deal with at this point in the electoral cycle.

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[Lord Lansley (Con)]

My Lords, I have four amendments in this group. Amendments 16 and 17 relate to the conduct requirements that the CMA can impose on designated undertakings, and Amendments 20 and 25 relate to countervailing benefits in relation to that conduct. I will come to that in a minute. Let me stick for a moment with Amendments 16 and 17.

Amendment 16 was helpfully introduced, to some extent, by what the noble Lord, Lord Clement-Jones, said about the activities in the run-up to the introduction of the Digital Markets Act in the European Union. There was a deadline of 7 March for that, and considerable attention has been paid to what Apple in particular has done in relation to that. The noble Lord made Apple’s position clear. It is saying, essentially, that we can either stay with our existing system, and it will charge 30% by way of fees for apps on the App Store, or we can go to this alternative which enables us to comply with the DMA, and Apple will offer an alternative but with a 17% fee for apps plus a 3% core technology fee, and, if you go beyond a million downloads, you will get a 50 cents processing charge per download. Those who fear that their app may go viral, with millions of downloads, are potentially facing enormous costs for processing them through the App Store. As far as all the potential users of the Apple App Store are concerned, this potentially restricts their opportunity for competition rather than enabling it.

My first point is to further reinforce that we have come together to design legislation in support of the Government that is more flexible than the Digital Markets Act. The DMA, in effect, puts the obligations into the originating Act. To change them will be considerably more difficult than would be the case for the Competition and Markets Authority in our regime to change the structure and the content of conduct requirements. Potentially, we have really good flexibility.

Amendment 16 is linked to whether the powers to impose conduct requirements enable the CMA to act in relation to the leveraging of market power in digital activities into other activities—the wider system of its business. Amendment 16 is absolutely about whether the conduct requirements that can be imposed under Clause 20 are sufficiently wide to enable the Competition and Markets Authority to structure them to limit activity which restricts competition in the way that these efforts are being pursued in relation to the Digital Markets Act. To that extent, Amendment 16 asks the Minister, if he would be kind enough to respond in this light, whether, if a designated undertaking were to behave in that sort of way, the CMA would have the power under the conduct requirements to respond and act, and to do so rapidly, to frustrate that kind of anti-competitive result.

Amendment 17 is slightly different, in that we discussed it in Committee. One of the European Union Digital Markets Act obligations is termed expressly to prevent others seeking to stop someone making a complaint to any public authority about non-compliance with the relevant obligations. I looked to see whether our conduct requirements, specified in Clause 20, cover a similar circumstance. In discussion in Committee, the Minister directed me to the “fair and reasonable terms” provision, which is very wide ranging but does not cover this, because these are not the terms of a contractual relationship between a designated undertaking and its users or potential users. It may not relate to that at all.

The Minister also directed me to the question of discrimination, but I do not think this is about discrimination between users; it is about preventing someone, who may be a user, a potential user or a potential competitor, from going to a public authority and saying, “This undertaking does not comply with its conduct requirements”. We know—I will not repeat the evidence that I gave in Committee—that there have, unhappily, been circumstances of intimidation of those who would complain to regulators about the conduct of organisations with significant market power. I return to this simply to say to the Minister that I am not yet convinced. Can he convince us that this kind of activity is covered by the conduct requirements? If it is not, will he undertake to ensure that the necessary changes are made to Clause 20, which the legislation would permit?

I will also speak to the amendments about counter-vailing benefits exemptions. Amendments 23 and 24 revert the Bill to its original wording, which would be better than where we are now. I have looked at Clause 29 from my point of view and I cannot find a good reason for it, so I thought it better to leave it out. If there is a conduct investigation and there are countervailing benefits, they should be presented to the CMA when it makes representations to a conduct investigation. Why would they be left to any other time or specified separately in the legislation?

I thought it better to amend Clause 27 such that, when making representations, the designated undertaking may give details of the benefits associated with its conduct to form part of that investigation. At that point, it should come forward if it is prepared to make commitments that the CMA could accept, without necessarily making a finding, to close that investigation.

All this should take place in Clause 27 on representations, because that is where the sequence lies. I do not understand why Clause 29 has been added at what appears to be a later stage in the sequence of the legislation. As it is a separate clause, it appears as though the benefits can be presented at an entirely separate point.

As I have also discussed with the Minister, there is an analogy with the exempt anti-competitive agreements under the Competition Act 1998. I was on the stand when that Bill was in Committee and this is a very different kettle of fish. The 1998 Act set out broad descriptions of agreements that would be deemed anti-competitive and therefore void, except if undertakings came to the Competition and Markets Authority; then the burden is on it to demonstrate that they have, in effect, countervailing benefits, such as to innovation, the consumer and the like, without an adverse effect on competition.

That is ex post regulation. That is agreements and obligations that are broad-ranging and apply across industry. Here, we are talking about conduct requirements that are optimised and designed in relation to that undertaking in the first place. This is ex ante regulation. You cannot compare ex post provisions in the Competition Act with ex ante regulation under this legislation. They are not the same kind of thing.

Therefore, again, I come back to the argument: let us not have exemptions. The use of “exemption” seems wholly inappropriate. We have here a very straightforward process. Conduct requirements require, in themselves, under Clause 24, for there to be a consultation. The undertaking should tell the CMA what the benefits associated with its conduct are at that stage.

There is a forward-looking process; the conduct requirement is supposed to look forward five years, but none the less, circumstances change. The CMA can review a conduct requirement, and the designated undertaking should come to the CMA if circumstances change and there are countervailing benefits and ask for the conduct requirement to be reviewed. Even if, under all these circumstances, a conduct investigation notice is issued, the undertaking should come forward and express what the benefits are at that point. Under none of these circumstances is there a requirement for the use of “exemption” or for an additional clause that offers countervailing benefits as such.

I dare say I will not press this, because there is probably more to be said for Amendment 23 and going back to the original wording, but it afforded me the opportunity, I hope, to explain why I think the whole proposition in Clause 29 seems misplaced.

[Baroness Kidron (CB)]

My Lords, I find myself in a slightly awkward position because my name is listed in support of Amendments 23 and 24, but I find the argument of the noble Lord, Lord Lansley, incontrovertible, and maybe he should press his amendment.

On the wording, I want to put on the record the view of Which?:

“This is a legal loophole for big tech to challenge conduct requirements through lengthy, tactical, legal challenges. It would tie up CMA (i.e., taxpayer) resources and frustrate the intent of the legislation. Whilst we agree with the intent of this provision, which is to encourage innovation that will benefit consumers, it is critical that these provisions do not inadvertently give designated firms a get out of jail free card from DMU decisions”


by presenting opaque consumer benefits.

I put that on the record because it is so measured in comparison with many of the emails and representations I have had, and still is absolutely categoric that this is a get out of jail card. Like the noble Lord, Lord Lansley, I do not understand why the regulator duty to be

“proportionate, accountable, consistent, transparent and targeted”,

within the context of coming to the conduct requirements and taking up any countervailing benefits at that point, is not adequate. So I will support the noble Baroness, Lady Jones, and, indeed, the noble Lord, Lord Lansley, should he change his mind in the next few minutes.

I also add my support to Amendment 60, tabled by the noble Lord, Lord Fox. I am an enthusiastic supporter of international standards. They provide for soft law and, having worked with the IEEE on a number of standards over the last few years, I see how brilliantly they work to bring disparate people together and provide practical steps for those tasked with implementation. I declare an interest in relation to the IEEE, which gives some funding to 5Rights Foundation, of which I am chair.

The point I leave with the House is that, toward the end of 2022, I had two conversations with companies that will certainly be SMS about why they were now recruiting for employees to work on standards full-time. I believe the CMA should be in the standards-writing game.