Digital Markets, Competition and Consumers Bill

Report (1st Day)

Clause 6: Position of strategic significance

Amendment 1

1: Clause 6, page 4, line 3, leave out subsections (2) and (3) Member's explanatory statement This amendment would remove the power for the Secretary of State to amend the conditions in subsection (1) by statutory instrument.

My Lords, I am delighted that we have made it to Report and look forward to today’s debate. Before we get under way, I express my sincere thanks to all noble Lords who took part in Committee and to those with whom I have had the pleasure of discussing a number of issues that have arisen since then. I am extremely grateful for the constructive, collaborative nature of those discussions. It is clear to me that the broad support for this Bill across the House and the desire to see it pass swiftly remain undiminished, which is great to see.

The Government have tabled a number of amendments to improve the clarity and accountability of the regime. I turn first to the amendment to the Henry VIII power in Clause 6. This clause would originally have given the Secretary of State the power to amend by regulations the position of strategic significance conditions in the Bill, to allow them to be updated to account for future changes to digital markets. The Government recognise that Henry VIII powers should be used only where absolutely necessary. I noted the strength of feeling on this issue in Committee and the concerns that the power could be used to introduce broad changes to the framework of the regime. The DPRRC also noted this point in its report on the Bill, for which my noble friend Lord Offord and I were very grateful. Reflecting that strategic significance criteria have been designed to be suitably broad and technology agnostic, we are content to remove this power. Amendment 1 will do that, so I hope that noble Lords will support it.

Amendment 42 ensures that non-commercial organisations acting in a non-commercial capacity will be subject to fines with the same fixed statutory maximum amounts and/or maximum daily amounts as individuals. We expect it to be extremely rare that the CMA would ever need to fine these organisations, but the Bill should provide for all circumstances. These organisations could be subject to financial penalties for investigative breaches—for example, providing false or misleading information to the CMA.

My Lords, Amendments 13 and 35 are in my name and those of the noble Baronesses, Lady Stowell and Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones.

The Bill has been welcomed across the House and it represents a crucial step forward in regulating the digital market. I pay tribute to the level of engagement that has taken place with Ministers and officials. We have had some excellent and well-informed debates in Grand Committee. However, good though this Bill is, it is capable of improvement. I refer to my interests in the register. I am not a competition lawyer, but I do have experience of judicial review and of the operation of the Human Rights Act. I was also chair of the Independent Review of Administrative Law, which reported a few years ago.

My Amendment 13 is concerned with the use in the Bill of the word “proportionate”. Despite some heavy lobbying of the Government by big tech, the right to appeal against an intervention by the CMA will engage the judicial review test, rather than a merits test, except as to penalty. Later amendments will probe the appeal test further.

The original adjective in the Bill was “appropriate”. The word “proportionate” replaced it at a late stage of the Bill’s progress through the Commons. Why? I am afraid I have yet to receive a satisfactory answer. In Grand Committee, the noble Lord, Lord Lansley, referred to a letter from the Minister about the change. However, it did nothing to allay concerns that the change was a response to lobbying by big tech.

According to one view, it is an innocuous change; indeed, one would expect an intervention to be proportionate. The word also has a reasonable legal pedigree: for example, you can defend yourself against attack providing your response is proportionate to the attack. Whether your response is proportionate will be a question of fact, or for a jury to decide.

Judicial review, however, is not primarily concerned with the facts of a decision but with the process whereby the decision is made. Classically, the courts got involved only if a decision was so unreasonable that no reasonable public body could have reached it. The scope of judicial review has expanded to include challenges based on, for example, irrationality or failure to take into account relevant considerations. There are other grounds, but all are concerned with how the decision is reached rather than whether the court agrees with the factual findings.

Now that my friend the noble Lord, Lord Faulks, has spoken, I am happy to stand, because I hoped that he would cover all the technical aspects of his amendment, to which I have put my name.

Before I turn to the amendment, at the start of Report it is worth me reminding noble Lords and my noble friends the Ministers of something, because there are an awful lot of amendments in this group and they cover quite a bit of ground. The Communications and Digital Select Committee, which I have the privilege to chair, endorsed the Digital Markets, Competition and Consumers Bill as it was introduced in the Commons. We held quite a few hearings on the Bill last year, which came after a long period of campaigning for this legislation, and so it was one that we cared deeply about. Indeed, we applauded the Government for striking the right, careful balance on some difficult issues covered in Part 1 of the Bill, especially the appeals process, the countervailing benefits and the leveraging principle.

However, we did give one word of caution, knowing that the Government would be subject to intense pressure from the big tech firms as the Bill progressed through Parliament. We said: do not dilute the Bill. It is the job of Parliament to scrutinise and improve legislation, and by doing that we refine it. It is not a job that should mean that nothing ever changes, but it is also our job to protect the Bill from being weakened in a way that might diminish its effectiveness or make it harder for those responsible for delivering it to meet the original objectives and purpose of the Bill. A lot of what I am going to be arguing for—or, sadly, voting for—will be because I think the Government got it right the first time, and I regret some of their decisions to amend parts of the Bill in those areas that I have just identified.

I start with the appeals process. The Government have held their ground in maintaining the judicial review process for appeals against substantive rulings by the CMA, and I welcome this. However, I am concerned about the Government’s decision to swap the word “appropriate” for “proportionate” in Clauses 13 and 46, as my friend the noble Lord, Lord Faulks, has just described, as this could provide a loophole or opportunity for the SMS firms to argue against CMA remedies or conduct requirements, perhaps by proposing alternative solutions that serve their interests but might not necessarily increase competition. That is why I have added my name to the amendments of the noble Lord, Lord Faulks, and will join him if he decides to divide the House.

As to appeals against fines and penalties, where the Government have changed the procedure from the original judicial review process to full merits my concern is the opportunity for the SMS firms to use this procedure to re-open the substantive rulings. I have retabled my own Amendment 45, which would put in the Bill that there must not be any read-across from appeals and fines, which are proposed to be by the merits procedure, to substantive rulings, which are restricted to the judicial review process.

In Committee, I said that I was trying to be constructive and avoid overturning what the Government have done in the Commons. I am disappointed that they did not consider my amendment as a suitable compromise, although I must say at this point that my noble friends on the Front Bench and their officials have been very generous with their time, meeting not just me but other noble Lords and talking to us about these issues. I am hugely grateful to them for that. I will, of course, wait to hear what my noble friend says when he comes to wind up.

The amendments in the name of the noble Baroness, Lady Jones, would revert the appeals process on fines back to the JR procedure away from merits. I will wait to hear what my noble friend says on that, but, because the Government have not moved on this in the way that I had hoped they might, at the moment I am minded to support the noble Baroness, Lady Jones.

I now move to what I might describe as private actions. This is quite technical. I am referring to Amendment 47, in the name of my noble friend Lady Harding, to which I have added my name. My noble friend apologises for not being able to be here to speak to her amendment today, but she is caught up in other responsibilities away from Parliament.

The problem this seeks to address is that, as things currently stand, there is an opportunity for legal action to be taken against an SMS firm via the courts, which could lead to the courts ruling on matters that the CMA is also looking at, the result therefore being two conflicting outcomes from two competing regulatory regimes at the same time. Our concern about this situation is that it could lead to some of the SMS firms not wanting to participate constructively with the CMA in this new ex-ante regime. The whole point of this new regime is for us to cultivate this participatory approach, so this could be quite counterproductive.

The amendment would place a requirement on the courts to avoid judgments that conflict with contemplated CMA decisions regarding a potential breach, and stay civil proceedings that overlap with the CMA’s ongoing forthcoming investigations. It would ensure that the courts have appropriate regard to and avoid pre-empting the CMA processes and decisions, while not preventing private action after decisions have been made, therefore minimising this risk of conflict. The amendment certainly preserves the rights of redress. It does not prevent stand-alone private enforcement either, where the CMA has not opened its own investigation or does not anticipate doing so, or follow-on damages where the CMA has already established a breach.