Digital Markets, Competition and Consumers Bill

Seema Malhotra Excerpts

2nd reading
Wednesday 17th May 2023 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to speak on the Second Reading of this important Bill on behalf of His Majesty’s Opposition. The world has changed enormously, as has technology. I thank my hon. Friend the Member for Bristol North West (Darren Jones), the hon. Member for Weston-super-Mare (John Penrose) and other colleagues for their important and influential work in the development of this Bill, which Labour welcomes, having led the way in calling for large tech companies to be properly regulated to ensure competition in digital markets. We have long called for measures to protect consumers, enhance innovation and promote competition in digital markets, to unlock growth and level the playing field for innovative smaller businesses.

In the midst of a cost of living crisis, the Bill could not be more important. As the Minister alluded to, fairer markets will save billions of pounds for consumers. This important Bill updates the UK’s competition and consumer rules, in line with a changing economy and changing consumer behaviours, through three main areas of reform.

First, it creates a new pro-competition regime for digital markets by putting the Digital Markets Unit on a statutory footing and establishing a process for designating the “strategic market status” of firms that meet specific criteria in relation to certain specific digital activities. These firms will be subject to regulated behaviour regarding such digital activities, in the form of conduct requirements to help ensure fair competition.

Secondly, the Competition and Markets Authority will have new powers on market investigations, enforcement of existing competition rules and enhanced mergers and anti-trust activity. Thirdly, there are updates to consumer law, reforming consumer policy to increase consumer protection.

As long ago as 1950, the Labour manifesto written by Michael Young promised:

“An independent Consumer Advice Centre will be set up to test and report on the various consumer goods on the market. Good manufacturers will be protected and unscrupulous advertising exposed.”

Since then, Labour has certainly been the champion of consumers. Consumer rights are a proud part of the Labour and Co-operative tradition and values.

The Government needlessly delayed this Bill as a result of infighting and the changing of Ministers and Secretaries of State. Since the Bill was announced a year ago we have had three Prime Ministers, four Business Secretaries and four small business Ministers. I congratulate the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully), who has done a full circle. He was the first Minister I shadowed in my role, and he will be winding up this debate.

It has been a year since this Bill was promised and five years since the Government established their digital competition expert panel. With these delays, we have fallen behind our European neighbours in this vital policy area, so this is an important Bill and we will support its Second Reading.

I thank the Under-Secretary of State for Business and Trade, the hon. Member for Thirsk and Malton (Kevin Hollinrake), and his officials for their meetings with me and my hon. Friend the Member for Pontypridd (Alex Davies-Jones). I hope this is the spirit in which the Bill will be considered in Committee and in which we constructively debate the gaps we believe there to be in the Bill, which I will highlight today. I also thank those who have been involved in the development of this important policy and legislation, from the CMA, Which?, UKHospitality, the Chartered Trading Standards Institute, Citizens Advice, techUK and smaller enterprises.

In digital markets, a small number of large technology companies have an ever-increasing dominance. The subsequent lack of competition and regulation has acted as a barrier to entry and expansion in digital markets, preventing new entrants from bringing innovation and choice to the market. The seriousness of this for our economy and consumers has become apparent in the billions of pounds in penalties levied for anti-trust violations.

Legislators around the world are catching up with the challenges we face in relation to this abuse of dominance in digital markets. Indeed, the OECD’s global forum on competition highlighted this five years ago, outlining how many digital markets

“exhibit certain characteristics, such as low variable costs, high fixed costs and strong network effects, that result in high market shares for a small number of firms… Firms in these concentrated markets may possess market power, the ability to unilaterally and profitably raise prices or reduce quality beyond the level that would prevail under competition.”

In the UK, the Furman report concluded in 2019 that competition in digital markets needed a “new approach,” and in December 2020 the CMA convened a taskforce that recommended the creation of the Digital Markets Unit with a new regime for regulating digital firms with strategic market status.

The Office for National Statistics reports that, between 2008 and 2020, the percentage of adults reporting having shopped online in the previous 12 months increased from 53% to 87%. This ongoing trend has increased consumer exposure to the harms associated with the digital economy, including the use of consumer data, harmful online choice architecture and misleading information.

Those are reasons why the Bill needs to deliver on being a pro-competition, pro-consumer and pro-growth Bill. We welcome steps to address consumer harm resulting from monopolisation of our increasingly digital economy, while making sure that innovation is not stifled and that we are realising the benefits of new technology for social and economic progress. The interests and rights of consumers, and the enforcement of those rights through effective competition in this new, complex and evolving digital marketplace, need to be at the core of this legislation, which is vital for all of our constituents.

The challenge now is to get the legislation right. It is important that the new powers given to the CMA to ensure competition in digital markets are not watered down as the Bill progresses. Powers are needed to crack down on unfair practices. That means there must be clarity on how the new powers will be used, along with the right scrutiny, transparency and accountability, both of the CMA and of the Government to Parliament. In addition, there must be clarity on thresholds and the process of appeals. I am sure we will discuss the checks and balances in detail in Committee, not least because 35 new Henry VIII powers are in the Bill, as listed in the delegated powers memorandum. The November 2021 House of Lords Delegated Powers and Regulatory Reform Committee report noted:

“Henry VIII powers are controversial and for good reason. Every such power; and its scope, must always be fully justified.”

Let me say a few further words about what we welcome in this Bill. We support the approach taken to the legislation, which seeks to be targeted to specific anti-competitive digital activities and is arguably more flexible than the reforms brought about in the EU. If that allows a more proportionate and targeted set of interventions, that is welcome. Legislators across the world are all learning, and we all want to see this be an effective regulatory framework that helps innovation, rather than hinders it, and protects consumers.

An example of how this is beginning to work is how the CMA has worked with Google on its digital Sandbox. An issue relating to third-party cookies emerged during the CMA’s digital advertising market study and a Competition Act 1998 case was then opened. Google’s proposed changes could have had privacy benefits, but they could also have given Google an anti-competitive advantage, strengthening even further its position in digital advertising markets. The CMA reached legally binding commitments with Google to address these concerns. It is important to say that both sides continue to work together and with the Information Commissioner’s Office. This is about working in partnership with business, and in the public interest, and this Bill represents a pragmatic step towards achieving that. We also welcome the inclusion of proposals such as monetary penalties for failures to comply and making undertakings directly enforceable, which were raised at the consultation. We welcome the strengthening of the alternative dispute resolution provisions, although we believe they could be strengthened further.

However, there are notable gaps that we are concerned about—areas where we are surprised and concerned the Bill does not go further. Such areas include subscription traps, tackling fake reviews and other consumer harms. First, on subscription traps, it is always to be welcomed when the Government decide to adopt a Labour party policy, which seems to be happening increasingly often. In April, we announced Labour’s plans to crack down on rip-off subscription traps, which trap people into subscriptions they no longer want. We want to legislate to ensure that customers must opt in to, rather than opt out of, subscriptions that automatically renew. That will end automatic renewal as the default option, ensuring that consumers are offered an alternative. Instead, businesses would have to offer customers a default option without automatic renewal, with the option for customers to seek automatic renewal if they prefer. At present, consumers only need to be informed about their continued subscription, not given a genuine choice. That means they can end up trapped into contracts they no longer want or use. Citizens Advice estimates that £306 million per year is spent in the UK on unwanted subscriptions.

This Bill goes part of the way to addressing that by introducing new requirements to remind customers at the end of a trial and the beginning of an auto-renewed subscription charge. But it does not go far enough in tackling these traps and adopting Labour’s full proposals, which stakeholders also support. We will be seeking to strengthen the legislation in this area to make subscription auto-renewals opt-in, rather than opt-out.

Secondly, the Government, with much fanfare, announced that this Bill would introduce provisions outlawing fake reviews. News headlines last month trumpeted the Government’s briefing, saying:

“Buying, selling or hosting fake reviews will become illegal as part of changes planned in new laws.”

Fake reviews cause huge damage, both by encouraging consumers to buy unsafe or poor-quality products, and by ruining the reputation of hospitality venues in the UK. Such reviews are utterly unfair for honest businesses, which have no means of redress, but banning fake reviews is not mentioned in this legislation once. What has been lauded as a huge step in banning fake reviews appears to be a clause allowing the Secretary of State to add to the list of unfair trading practices in schedule 18. This is quite vague and so it could be very weak. I would therefore welcome clarification from the Minister on why this has been left out, and whether he is able to expand on what banning fake reviews will look like in practice?

On broader consumer harms, the Bill represents an opportunity to take action on a number of issues affecting consumers in the digital economy. That includes taking action against drip-pricing and misleading green claims, and requiring online marketplaces and social media platforms to make buyers aware of the status of a seller, none of which are dealt with in this Bill. Do we need stronger statutory consumer advocates? I ask the Minister: why does the legislation stop where it does? Should it not go further in addressing further consumer harms in the digital economy?

Finally, on delay, it has been a year since this legislation was promised in Parliament. The Government’s own impact assessment acknowledges:

“The Bill’s impacts are expected to begin in 2025 once the package of Bill measures has been implemented”.

That is the earliest it could be, but action is needed now. We are prepared to work with the Government not only to ensure effective scrutiny of the Bill, but to get it on to the statute book as soon as possible. That includes ensuring speed on guidance and codes of practice, and sufficiency of resources. There should be no more delays.

This legislation is welcomed by the Opposition but it is well overdue. It is a welcome step in creating a new competition and digital markets regime that will enable the competition authorities to work closely and fairly with business to ensure fair competition, and promote growth and innovation. Labour welcomes competition, consumer choice and protection as signs of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business. We believe there is a pro-business, pro-worker, pro-society agenda to be built for Britain, and that consumer and competition law play an essential part in that. I look forward to the Minister’s response.