Amazon and SMEs

Kelly Tolhurst Excerpts

Wednesday 27th March 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing this important debate and thank him for bringing this issue to Westminster Hall. That has enabled him to highlight the particular case of his constituent and it gives me the opportunity to respond. This subject is of personal interest to me. I am the Minister responsible for small business but, before coming to this place, I ran my own business and dealt with big organisations, so I am not unfamiliar with particular challenges that exist in the wider market and not just in regard to the sectors and platforms to which he referred.

In 2018, 5.7 million UK businesses were SMEs. That represents 99.9% of UK business, 60% of total UK private sector employment and 52% of turnover. People should be in no doubt that this Government, this Department and I understand that SMEs are the backbone of our economy. That is why it is of particular concern to me to hear about the experiences of the hon. Gentleman’s constituent as the SME seller Bikers Gear UK on Amazon. I can only imagine what a difficult experience that must have been for him and his family.

No company should be able to abuse its market position to the detriment of other companies, particularly SMEs. That is why, in our industrial strategy, we committed to a review of competition law, which is ongoing in the Department. As part of the review, we are actively assessing digital markets, including whether those markets pose unique challenges to competition law, such as novel forms of abuse of dominance. Part of the review will also involve assessing recommendations set out to my right hon. Friend the Secretary of State by Andrew Tyrie. His proposals outline reform of the competition and consumer protection regimes led by the Competition and Markets Authority.

The Government also welcome the recent publication from the digital competition expert panel—it was published alongside the spring statement. That independent report sets out how to unlock competition in digital markets. The panel was led by the renowned economist Jason Furman, who was chief economic adviser to President Obama. The proposals are at the frontier of global thinking on how to deal with the challenges of large digital platforms. One key recommendation is to introduce a new digital markets unit to ensure that digital markets work to deliver competitive outcomes.

In particular, recommendation 5 of the report states:

“To account for future technological change and market dynamics, the digital markets unit should be able to impose measures where a company holds a strategic market status—with enduring market power over a strategic bottleneck market.”

That proposal focuses on firms with “strategic market status”. It would be backed by powers to ensure compliance. We are assessing the proposal but, if taken forward, it would mean that large platforms such as Amazon would need to comply with a statutory code of conduct or some other form of regulatory framework. The code of conduct will cover how large platforms interact with smaller firms, ensuring that that is fair. The Government will consider the reports’ proposals and report back by the summer.

Importantly, the hon. Member for Cardiff West highlights the fact that businesses, and in particular large businesses that are leaders in their industries, must act responsibly. This Government support responsible business as a force for good in society and we are prioritising in our modern industrial strategy responsible long-term business growth. Our new company reporting requirements make big businesses more open, responsive and accountable to society. That includes the issues of executive pay, and relationships with employees, suppliers and customers. Our inclusive cconomy partnership brings together businesses and civil society to tackle social challenges. Our civil society strategy announced that the Government would refresh their policy approach to responsible business during 2019, and we are partnering with the Department for Digital, Culture, Media and Sport as we work towards that objective.

We recognise that we must be active not just in holding large corporations to account, but in supporting small businesses in our economy, including SME retailers like Bikers Gear UK. This Government are working hard to support retailers of all sizes as they respond to market pressures from a range of factors. Retailers will need to adapt to take on the challenges and opportunities presented by the changes, and the Government want to support the sector as it responds to change.

That is why in March 2018 we established the industry-led Retail Sector Council to bring Government and industry together to boost the sector’s productivity and economic health. All retail activity in the UK, including SME retailers, is represented. I co-chair the council, and it is hugely valuable in understanding the concerns of retailers in the changing landscape. The council has agreed its priority work areas for the next two years: they focus on costs to businesses, skills and lifelong learning, employment protections, the circular economy, consumer protections, and retail and the industrial strategy. A senior industry figure will lead each of the work groups and bring proposals for action for both industry and Government back to the council for consideration.

I want to be clear that this Government want all types of retail to thrive now and in the future and that I am committed to playing my part. I and my officials in the Department regularly engage with Amazon, and I am always vocal in encouraging it to leverage its resources to the benefit of SMEs across the country. Douglas Gurr, Amazon UK country manager, serves on the Retail Sector Council which, as I said, I co-chair. I met Doug and a number of Amazon Marketplace SME retailers last October to discuss and understand the issues they faced. However, this debate has highlighted to me the need to ensure that I reiterate to Amazon that it needs to treat all suppliers with absolute fairness, and I will be sure to make that point to Amazon directly after the debate today.

The hon. Gentleman’s debate has highlighted important issues. I have said before and I will say again that SMEs are the backbone of our economy. This Government are committed to supporting SMEs and to reviewing our frameworks in the context of the ever changing marketplaces and organisations that are growing. No company should act inappropriately in a marketplace or abuse its position.

I trust that the details I have outlined today of the actions we are taking in reviewing competition law and leading the way on responsible business demonstrate to the hon. Member for Cardiff West that the Government and I take these issues very seriously. I again commend him for bringing the debate to Westminster Hall and for giving a very articulate explanation of the particular challenges that his constituent, Mr Brana, has had to endure. I would be more than happy at any stage in the future, if it were necessary, to get further information from his constituent, if he would like that, because this is an area of interest. I would like to finish by saying that I wish the hon. Gentleman’s constituent all the best in his new venture. I wish him every success and I thank the hon. Gentleman for the debate today.

Question put and agreed to.