Digital Markets, Competition and Consumers Bill

Committee (3rd Day)

Clause 89: Procedure and appeals etc

Amendment 64

64: Clause 89, page 55, line 18, leave out “, 114 (appeals)” Member's explanatory statement This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.

My Lords, in rising to move Amendment 64, I will also speak to Amendments 65, 67, 71 and 72. I thank the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Harding and Lady Kidron, for their support. The noble Baroness, Lady Kidron, cannot be here and sends her apologies, but she asked me to stress her absolute support for this amendment. I have added my name to Amendment 66, in the name of the noble Baroness, Lady Stowell, and I look forward to hearing from the noble Lords, Lord Holmes and Lord Tyrie, who, I am sure, will make important contributions shortly in support of their amendments. All our amendments would revert the appeals process back to judicial review principles for resolving appeals against penalty decisions, unlike the late government amendments, which substituted merit reviews.

This debate follows on from last week’s excellent debate on the impact of making CMA decisions proportionate and strengthening the right of SMS firms to argue for countervailing benefits to be taken into account. The issue of judicial review versus merit appeals goes to the heart of the argument about achieving the right balance between the rights of SMS and challenger firms. Of all the many submissions we have received on the Bill, this has received the most attention—from those on both sides of the argument—and we have taken note of all those views.

The Government’s amendments matter, because penalties such as fines are the most significant deterrent in preventing strategic market status companies breaking the conduct requirements established by the CMA. There is real concern that, under the new wording, SMS firms will use the appeals process to delay implementation of the fines and thereby reduce their incentives to comply with the order. Also, as the fines do not have to be paid until any legal challenges are finally resolved, there is an incentive to drag out the final decision through the courts. The fact that they have lobbied for these changes raises real questions about their motivation in pursuing this.

My Lords, I will speak in particular to my amendment in this group, Amendment 66, which does what it says quite clearly in its explanatory statement. This amendment would make it clear on the face of the Bill that

“the only CMA decisions subject to full merits review in Part 1 of the Bill are the decision to impose a penalty, the level of the penalty, and the timing of the penalty”.

Before I go on, may I please also thank all noble Lords who have added their names to my amendment? They are the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Black of Brentford—no, Brentwood; sorry, they are quite different, I think. I will say something shortly about the other amendments in this group.

Noble Lords will know that I was very public and vocal in airing not just my own concerns but those of the Communications and Digital Committee that the essential judicial review process for appeals against CMA rulings that is in the Bill might be overturned by the Government in the face of lobbying by big tech. As I said at Second Reading, there was much relief that the Government did not go as far as we feared they might, but the introduction of a merits appeal on penalty still causes alarm, because it is hard to see how such an appeal will not reopen the substantive finding.

My amendment seeks to prevent that happening, but we need to look at the practicalities of this, which is where I would also include the other amendments in this group that seek effectively to reverse the Bill back to its original wording. If a firm appeals the penalty, how will a complete rerun of the basis for the CMA intervention be avoided? I have had a conversation with my friend, the noble Lord, Lord Faulks, because he is the legal expert—I am not at all. He made a couple of points to me that are relevant for me to air in my remarks.

My Lords, it is a pleasure to follow my noble friend Lady Stowell in speaking to my Amendment 69. As has already been mentioned, a common theme runs through all the amendments in this group: limiting full merits appeals and ensuring that in practice they apply only to the imposition of financial penalties and the quantum of those penalties, as set out in Clauses 85 to 92.

As has already been stated, when he sums up, my noble friend the Minister needs to explain how this will operate in practice and why this situation is so special that a different approach is needed from that of any other regulatory environment, such as Ofcom.

There is nothing more to be said. Following on from the noble Baroness, Lady Jones, I am tempted to ask whether the amendments were government late amendments or late government amendments, but I will leave that hanging with the Committee. Ultimately, we need to ensure that we have clarity on how this approach will work when the Bill becomes law and that there is a watertight limit on the deployment, and potential misuse, of full merits appeals.

I have put a couple of amendments down which I suspect will not fully accord with the mood of the majority of the Committee on JR. I will also support the removal of full merits appeals on fines, and I would like to explain why I have taken those positions.

The Government took a number of important decisions on appeals in the other place. One was an amendment conceding that the scale of fines will be subject to a full merits review. Another stuck with the narrow definition of JR, or pure JR. Those two decisions are directly linked—politically, economically and legally—and there is a trade-off between them. They are best considered together.

My view on the fines issue is straightforward. There are two main reasons why the Government have got this decision wrong. First, a key point that we must bear in mind is that fines in the UK for all forms of breach of competition, anti-trust and consumer protection law are, on average, far lower than those in any comparable jurisdiction. As a result, both in the competition field and with many financial regulatory issues, fines are treated as a business cost by large firms. This has been a major weakness of our regulatory framework for decades and is still there now. If fines are to serve as a deterrent to platforms, they need to be large—perhaps very large, even unprecedentedly so for the UK. I fear that a full merits review will drag fines in only one direction, and we have the history of fines review by the CAT in other areas in support of that view.

Incidentally, I am amazed that the Treasury has not taken a closer interest in all this, because fines score against the consolidated fund, but it seems quite sleepy on this issue. It should be very wary of a full merits review of fines.

The Government’s mistake on fines is a mistake for a second reason. As has been pointed out, a full merits review of fines could all too easily become a full merits review of the case itself. I can see review drift easily taking place. There, too, we should look at the history of the CAT’s treatment of these issues. A seemingly minor concession may well drive a Trojan horse through the Government’s stated intentions when they first sought to justify the creation of a DMU, with its unprecedently huge powers. In a nutshell, those intentions were quick administrative scrutiny, supported by a powerful deterrent, and strongly limited but not negligible scope for appeal on merits. That is the second point I want to make, on which I think I am at odds with the mood of many in the Committee.

On JR, the Government have not put in the Bill what they have consistently said they would do, for over four years. When they first put the idea of JR forward as a review standard, they repeatedly said—orally and in all their documentation—that they were bringing the CMA into line with the review standard of other regulators. They cited Ofcom particularly. I quote in full from the task force document from 2020:

“Adopting a judicial review standard for a regulator’s decision is consistent with the government’s recent approach to other similar regimes. In 2017, the standard of review for appeal to the Competition Appeal Tribunal (CAT) from Ofcom’s communications appeals was changed from being an appeal ‘on the merits’ to one applying the principles of judicial review”.

Here is the DMU on the JR approach:

“This approach would be consistent with approaches taken in other ex ante regimes”,

and then a footnote makes it clear that