Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026.

My Lords, I will speak also to the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026.

These instruments relate to the alternative dispute resolution, or ADR, chapter in the Digital Markets, Competition and Consumers Act 2024—the Act—which received Royal Assent in May 2024. The Act repeals the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 and replaces it with a strengthened framework in Chapter 4 of Part 4.

In most instances, disputes between consumers and businesses can be resolved without the need for any formal action. But when consumers and the trader cannot come to a resolution, ADR is an effective means to secure redress for the consumer without resorting to litigation. All ADR providers are independent third parties offering dispute resolution that is usually less confrontational to the consumers and businesses involved. But not all ADR providers have the same accreditations and standards, so consumers can experience inconsistent quality of services.

For ADR to be effective, it must be of high quality and meet certain standards. The Act aims to strengthen the quality of ADR available to consumers by: introducing a mandatory accreditation framework for ADR providers for consumer contract disputes; providing a robust set of accreditation criteria to ascertain ADR providers’ expertise, transparency, independence and accessibility prior to their being accredited; and providing ongoing monitoring and review to ensure that accredited ADR providers continue to meet those high standards. The Act includes the power to revoke or suspend accreditation, limit accreditation, or impose further conditions if a provider is found to be non-compliant.

The intention of mandating accreditation of ADR providers is to strengthen the ADR framework in the UK. The Government believe that these changes will help deliver a trustworthy, timely and fair service that consumers and businesses can trust to resolve consumer disputes, with improved oversight to monitor standards and ensure consistency.

Section 307 of the Act allows certain ADR functions to be conferred on another person. The regulations before the Committee confer on the Chartered Trading Standards Institute—CTSI—responsibility for managing the provision of ADR in consumer contract disputes in non-regulated sectors, including the functions of accreditation, monitoring and reporting on the operation and effectiveness of ADR provision.

This includes upholding the standards of ADR providers in the UK through powers to compel or sanction ADR providers to improve performance in the event that they do not meet their obligations. It also requires the CTSI to prepare quarterly and annual reports for the Secretary of State for the Department for Business and Trade.

My Lords, I am grateful to my noble friend for introducing the statutory instruments. This is not a very complicated issue and I do not have much to say about it, but I do have one or two questions.

First, this emerged from the digital markets Bill, which I was happy to play a part in. I was a bit surprised to see, on the duty to provide reports, that the reports have to be provided to the Secretary of State in writing on a “durable medium”. I wonder why the Government’s choice of words on this appears to rule out the possibility that we might go digital on these as well as many other things. Will my noble friend reflect on that when he replies?

Secondly, my more serious point is about costs and cost recovery. Clearly, an operation such as this under the CTSI must be paid for, but the way it is framed in the instruments before us means that these fees will come only from consumers. If the ADR is to work effectively, it really should be a benefit to both sides: it should be a benefit to the companies that are being queried about by consumers as well as to the consumers. I understand the point about the consumers being charged only a fair fee—this is well laid out in Schedule 1. Can the Minister say why we are not expecting costs to be recovered from those who also benefit from the system—the companies concerned? Obviously, the last thing we want is to find that this is a huge extra burden on already-burdened consumers, who have to pay through the nose both for their own case but also for the case being answered by the other side.

My third point is more general. There does not seem to be much in the documents before us about reviewing these arrangements. This is quite a big change; it is a measure that will set up quite a complex structure. It will be to the benefit of consumers, and I welcome it, but there is a question about whether it will be reviewed and looked at. Can the Minister reflect on that when he responds?

My Lords, I am grateful to the Minister for his introduction, which was very clear, and to the noble Lord, Lord Stevenson, who asked some of the questions I was going to ask, which is good. I too worked on the Digital Markets, Competition and Consumers Act 2024. It seems longer ago than 2024, and it took a bit of dredging up to come back to this.

In general, we welcome the idea of strengthening the ADR process and how that might then get more people to use it, rather than go into more lengthy disputes —we can talk about that at the end. In the past, as we hear, there was a voluntary registration system, and it would be interesting to hear about the number of practitioners—it would be useful to know the scale—who will need to be registered. Of those, how many were already registered? Do the ones who are currently registered, having volunteered to register, have to reregister themselves and go through another process? What is the scale of the number of dispute resolution operations that will have to be registered? What is the actual process of registration? Is it, “Fill in this online form and you get your registration certificate over the internet”, or are there four-day visits from 15 inspectors—or is it somewhere between that and Ofsted? There is no sense of the scale of what getting registered will mean or indeed of what the cost of getting registered will be.

We need some sense of the scale of the task that the CTSI will have to undertake, which then raises the question: does the CTSI have the capacity to pick this job up? There will be a big fat bulge of people needing to be dealt with at the front end of this. What happens in the meantime? If I were a currently registered or unregistered practitioner and I put my application into the CTSI, would I not then be able to trade until such time as I had my registration, or is there a grace period through which I could continue to operate until the CTSI had sufficient resources to deal with my case? How does the conveyor belt work and will the CTSI have sufficient capacity to handle what will be a really heavy workload at the front, which will obviously then tail off?

My Lords, I was not involved in the 2024 Act, so—to no doubt universal relief—I shall be very brief. As the Minister explained, the statutory instruments implement Chapter 4 of the Digital Markets, Competition and Consumers Act 2024, by replacing the voluntary accreditation system for alternative dispute resolution providers with a mandatory framework. It grants the Chartered Trading Standards Institute the powers necessary to accredit, monitor and, where necessary, sanction ADR providers and it introduces reporting requirements to ensure transparency and accountability.

I am interested in the answers that I am sure the Minister has ready for the noble Lord, Lord Fox, who raised some interesting practical points. I am also extremely interested to hear what a “durable medium” is.

It is carved in stone.

Paper is not that durable in fire or water, so are we talking stone tablets, or vellum, perhaps? I am very curious to know the answer to the question from the noble Lord, Lord Stevenson.

Obviously, alternative dispute resolution plays an important role in enabling consumers to resolve disputes quickly and without recourse to the courts, so a clear and enforceable accreditation framework should strengthen confidence in that system. On that basis, His Majesty’s loyal Opposition are happy to support these instruments.

I thank noble Lords for their contributions to the debate. As I stated in opening, the purpose of these instruments is to place the UK’s ADR framework on a stronger footing and to provide a more effective service for consumers and businesses alike. This feeds into the broader work of the DMCCA to bring greater fairness to digital markets and to bolster consumer protections.

I will try to respond to the questions raised by noble Lords today. The most important question, raised by the noble Lords, Lord Stevenson and Lord Sharpe, was about durable mediums. I am reliably informed that this includes digital. We do not have to go as far as stone tablets, as the noble Lord, Lord Fox, suggested. The digital medium is included in that, so that is the acceptable format.

The noble Lord, Lord Stevenson, raised an important question around extra burdens on consumers. Accredited ADR providers can charge a fee only if provisions for doing so are agreed by the CTSI and published. The purpose is to limit fees that consumers may be charged, thereby incentivising the use of ADR. At the same time, this is intended to discourage frivolous claims. Those fees should be up front and should be clear. There is a balance to be struck between ensuring that consumers have adequate access to ADR and that the core costs of the service are covered. We hope that this addresses that balance.

The noble Lord, Lord Stevenson, also mentioned reviewing the regulations. The Government have no specific plans to conduct a post-implementation review of this instrument or the reforms to which it relates, but we will continue to monitor and evaluate the operation of the system of ADR accreditation under the 2024 Act and the provision of the quality of ADR carried out in the UK through the quarterly and annual reports that this instrument requires the CTSI to provide.

The noble Lord, Lord Fox, asked about the capacity of the CTSI, the number of practitioners, how many will have to reregister, the processes and the costs. Those currently registered will go through a light-touch process to transfer their original registration across to the new system. We recognise that this transition period will place some burden on the ADR providers and aim to minimise this. The transition period will be in the region of six months, when ADR providers can continue to operate without the accreditation. In part, this will ensure that current providers and cases can continue without disruption. It will also give the CTSI time to manage the transition. We recognise that this will cause some extra elements of burden, but this seems like the lightest-touch way of transitioning to the improved system.

Before the Minister sits down, perhaps he could take this away: simply putting something up on the website—the “If we build it, they will come” approach—is probably not the best way for consumers to know that they have this service. You have to know it exists before you can find it. I suggest that the Minister takes away and discusses with the CTSI and others whether there is some sort of consumer marketing process that can follow once the capacity for ADR is there, so that people actually know it exists. I suspect that nobody knows the organisation exists—or very few people do—and certainly very few people know that ADR is a service on which they can call.

The noble Lord makes a really important point. Let me take that away and consult with the team and I will come back to him with a response on that.

The Minister answered very fully the question about the fees and how they would be monitored, but those were the fees to the consumers. I asked a separate question about why it did not seem to be a cost to the provider of the services, who would also benefit from the ADR. If he does not have the answer, perhaps he could write to me.

I think I did cover that but, if I did not, I will come back. The accredited providers will charge only a fee that is agreed already with the CTSI. That will be agreed up front and that will be published so that consumers know the charges they will be subject to. Perhaps we can pick this up afterwards. If that is not sufficient, I am happy to take further questions and to come back with a more detailed answer.

Motion agreed.