Digital Economy Bill

Lord Whitty Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th December 2016 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I am usually very pleased to follow the noble Baroness, Lady Wilcox, because she is usually the champion of the consumer. One of my few credentials for speaking in this debate is that, nearly 10 years ago, I fell out quite badly with the last Labour Government over their Digital Economy Bill because I felt that they were paying too much heed to the rights of rights owners and not enough to those of the new form of consumers. I still feel that, and shall return to that issue at some point in my speech, so I am departing from my usual terms of agreement with my famous predecessor as chair of the National Consumer Council.

My other credential for speaking here is that, only a few months ago, my sub-committee of the EU Select Committee produced a report on digital platforms. It was debated in the Moses Room on the last day before the Autumn Recess and had a distinguished but rather limited presence, including that of the Minister, whom I thank for his response then and for his subsequent letter. However, very few of the issues raised in that report are reflected in the Bill. My noble friend Lord Gordon described it, seasonally, as a Christmas-tree Bill with a lot of different things hanging from it. The trouble with Christmas trees is that some of the baubles are quite pretty and some are pretty ugly, but the real problem is that the parcel you expected to see at the bottom is not there. That seems to be a problem with this Bill. There is an elephant in the room: the role of large-scale digital companies, which dominate the market, dominate choice and therefore dominate consumers’ possibilities.

On the other hand, I welcome large sections of the Bill. I welcome the enactment of a USO in this area—very necessary if slightly belated. I agree with other noble Lords that the obligation is less than totally ambitious and that there are still problems with making sure it effectively covers rural areas, but in principle it is a major and important step. We are still well behind highly digitalised economies such as Korea and Estonia.

I welcome the provisions on consumer rights relating to switching and compensation, but they do not completely address the need for consumer control over their own information, nor do they deal with the issues of privacy and individual data. I also welcome the provisions on unsolicited electronic marketing by telephone or online, but, as my noble friend Lord Stevenson said, the only real way of dealing with that is by default. That is not enacted, but I welcome the provisions as far as they go. I welcome Ofcom’s powers relating to mobiles and telephones. I regret that the Government did not take the opportunity also to legislate for caps on individual consumer spending, which could then be enforced by regulatory action via the companies. There are therefore several bits of the Bill which deal with the interests of consumers. I wish that they went a bit further, but they are important and I welcome the Government’s move in those directions.

I welcome also the provisions on online pornography and age verification. I recognise the limitations and the extraordinarily complex issues which the noble Baroness, Lady Kidron, has just spelt out, but the Bill is a step in the right direction. However, underage children’s exposure to pornography is not the only issue of content that needs to be addressed in the online world—I will return to that in a moment.

I can also give a general welcome to the provisions on data sharing between public authorities and certain other bodies, provided that the right qualifications are put in. My interest in this area is that mentioned by the Minister: identifying people who are in fuel poverty for interventions such as the warm home discount and for local action to improve their living situation and reduce their energy bills. What is basically DWP information will need to be shared with energy companies. I hope that the list of public bodies can be extended to include GPs and public health bodies, because health professionals frequently recognise the impact of fuel poverty on individuals and their families. I would also like to see included the companies with which they deal, not just the retailers but district network and gas network operators.

For the reasons I have started to spell out, I am a little dubious about the intellectual provisions in Clauses 27 to 29, an issue on which I fell out with the last Labour Government—not a thing I did all that frequently. Since then, a number of market developments have taken place which change the scene—at that time, Spotify was almost the only place where you could provide mass access on a legal basis with some return to rights holders. I opposed then the proposed penalties for every user who, following warnings, downloaded illegal content which was covered by intellectual property rights. I thought that was overkill and still think so. I tried at that time to distinguish between those who, perhaps for their own entertainment, may have downloaded quite frequently but made no money out of it and those who made huge amounts out of it. I am glad that the Bill moves some way in that direction, while hugely increasing the maximum penalty. The penalty is probably a bit high and I would like the distinction between commercial benefit and normal consumer use made a bit clearer, but in principle I do not object to raising the penalty.

I now come to the real elephant in the room. It is the need to recognise and, if necessary, confront and intervene in areas where the dominance of large digital markets, particularly platforms, is restricting the range that business and consumers have, while greatly increasing their apparent—and real—access and transforming the speed with which we can transact. They identify options, markets, providers and consumers that we could not otherwise identify. For example, we almost regard using Google as a free public service—except that it is not free. We are all providing our information. That information can be used by search engines and other large platforms for their own and related companies’ purposes—in the case of conglomerates such as Google—by those to which they pass on information or with which they have commercial deals, and, above all, by the advertisers on those sites. Those valuable data from consumers and small traders are then combined and aggregated into an economic resource, which is the basis for the network effect and therefore the worth and increasing dominance of such companies.

The way in which companies use those data—not just selling them on but to prioritise their own rankings—is key. This Christmas, while we look on Google for sources of information on presents, on Amazon to buy our Christmas presents or on booking.com for our new year trips, the way in which the ranking comes up will be prioritised internally by those companies. This raises quite serious issues because, even within those companies, nobody understands the totality of their algorithms, yet the results are sometimes very distorting. They can put companies out of business, ruin reputations and distort the market. When the committee did its report, we found that these new technologies and large companies are not only disruptive in the positive sense—in that, through interactive technology and the internet, they provide a huge new ambit for us to operate in—but deeply disruptive of the previous traditional regulatory regimes for competition, mergers, consumer protection and data protection. We covered all those areas in our report and touched on intellectual property, along with issues as mundane as employment—as the recent Uber case showed in respect of the gig economy—let alone the rather wider employment implications which the noble Lord, Lord Baker, referred to.

As I say, the elephant in the room is that that dominance, those transactions and the way companies prioritise information to the final consumer is an enormously potent force in our society and economy. The regulatory structures have not caught up with that and, because of their dominance, it is unlikely that competition or changes in technology will easily do so. They may catch up one day, but not yet. There are sinister sides to this, as we have seen, for example, with the dominance of right-wing propaganda on Facebook and the terrible revelation today that if you type “Holocaust” into Google, the first 10 results are for anti-Semitic sites. That is a side-effect of what is otherwise a deeply benign movement for many people, which extends their lives and improves our commerce and trade. We need to address that at some point and I hope we will at least begin to do so during the passage of the Bill. I hope that we will also address some of the issues that the noble Lord, Lord Baker, raised regarding the impact of changing technology on society.