Online Safety Act 2023 (Qualifying Worldwide Revenue) Regulations 2025

In accordance with its duties under the Act, Ofcom has drafted these regulations, and it is now for both Houses to consider them.

Why have the Government agreed with Ofcom in going for these other words, which must be deliberately chosen? If they are deliberately chosen, will the Minister explain why “just and reasonable” is in any way equivalent to “true and fair” and, if it is not, as I suspect, why that choice was made? I do not say that it is wrong; whether the calculations on which financial results are being made are just and reasonable is a perfectly good way into any discussion with any organisation or company. It would be a good way of testing whether contributions to be made by companies in scope of Ofcom are just, in the sense, I suppose, of being justified, and reasonable in the sense of being able to be made to an apportionment that is sensibly aligned to the actions that will be taken by Ofcom against that company, very often against its economic interests. But I am intrigued by it. There is a perfectly good system that operates in the accounting world; “true and fair” has been used for years and years. We do not like it, but we have learned to live with it. Why have they not taken it forward in this sense?

I also urge the Government to commit to ongoing review of this framework, particularly given Ofcom’s intention to provide further guidance on just and reasonable apportionment. We support these regulations but expect further scrutiny, coupled with the Government’s commitment to address these assurances.

There is also the question—the noble Lord, Lord Stevenson of Balmacara, set this out clearly so I will not go into it much—of the interpretation of terms such as “just and reasonable”, particularly in revenue apportionment and currency conversion. Consistent application will of course be critical. How will disagreements be resolved and what guidance will providers receive?

I would also be grateful for clarification on Regulation 4(3)(b), which refers to

“parts where search content may be encountered (in the case of search services and combined services)”.

Ofcom has indicated that both “search” and “user to user” can include the functionality of AI chatbots. I am pleased that it has clarified this point but, if that is so, it raises an important issue: in cases where an entity is to be fined for an unsafe AI chatbot, which service is considered referable? Is it the chatbot service itself, or is the chatbot to be considered an amalgam of a user-to-user service and a search service?

If it is to be just the chatbot service—these are, of course, increasingly being used as search services—many of them generate very little revenue. In fact, AI is frequently loss making for many of the large organisations operating in this space. Could their qualifying worldwide revenue, at least as defined, be negative in such cases? If so, how would that be treated under the regime?

Of course, we welcome the exemption for services with under £10 million in UK referable revenue—we feel that that is a sensible threshold—but are the Government willing to review it if evidence shows that it is deterring legitimate or public interest platforms from entering or remaining in the UK market?

These regulations are a necessary step. They must be implemented fairly, not just for the global giants but for those trying to do the right thing. In closing, I thank the Minister for stepping in at short notice to guide us through this—it was no doubt a not wholly welcome surprise. I hope that the Government will have plans in place to monitor the regime’s impact actively and closely to ensure that Ofcom’s guidance is transparent and consistent and that they will remain open to adjusting thresholds or definitions if unintended consequences should arise.

Ofcom’s authority to collect fees is set up, as I said earlier, under Section 84 of the Act. Its authority to collect penalties is also set up under Schedule 13. If a provider of a regulated service does not pay its fee to Ofcom in full, Ofcom may give the provider a penalty notice specifying the outstanding sum and a date on which it must be paid. It may also bring legal proceedings for the recovery of the whole or part of the amount due.

I will write to my noble friend Lord Stevenson on the issue of Ofcom’s future receipts being lower than its costs.

In the last 12 months, we have seen key elements of the Online Safety Bill progressed and implemented. Many of Ofcom’s powers are now in effect. Platforms are now legally required to protect children from harmful content, including rolling out highly effective age assurance to tackle pornography, suicide, self-harm and eating disorder content. This instrument will bring us one step closer to a fully implemented online safety regime, ensuring that companies raising revenue from online services cover the cost of regulation—not taxpayers—and take responsibility for keeping our children safe online.