Clause 102 - Extension etc of periods

Digital Markets, Competition and Consumers Bill – in a Public Bill Committee am 9:25 am ar 27 Mehefin 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Philip Hollobone Philip Hollobone Ceidwadwyr, Kettering

With this it will be convenient to discuss the following:

Clause 103 stand part.

Government amendment 37.

Clauses 104 to 109 stand part.

Government amendment 38.

Clauses 110 to 114 stand part.

Government amendment 39.

Clause 115 stand part.

New clause 4—Annual report on operation of CMA functions—

“(1) The Secretary of State must, at least once a year, produce a report on the operation of the CMA’s functions under Part 1 of this Act.

(2) Each report must include an assessment of the following matters—

(a) the outcomes of SMS investigations carried out by the CMA, with regard to the number of undertakings found—

(i) to have SMS, and

(ii) not to have SMS;

(b) the extent to which designated undertakings have fulfilled any conduct requirements imposed by the CMA; and

(c) the effectiveness of any pro-competition interventions made by the CMA.

(3) The first report must be published and laid before Parliament within one year of this Act being passed.”

This new clause requires the Secretary of State to produce an annual report on the operation of the CMA’s functions under Part 1. The report will be made publicly available and will be laid in Parliament.

Photo of Paul Scully Paul Scully Parliamentary Under Secretary of State (Department for Science, Innovation and Technology)

Clauses 102 to 115 deal with the administration of the regime and some technical matters. Clause 102 provides the DMU with the ability to extend investigations for strategic market status, conduct and pro-competition interventions, including the use of the final offer mechanism, for up to three months for special reasons. If a firm does not comply with information or interview requests, the deadlines can be extended until compliance is achieved. Clause 103 supports that measure by clarifying that special reasons extensions can be used once per investigation and specifying how total extension periods are calculated. Together, that provides clarity for firms on how investigations will be run and ensures that the implementation of extensions by the DMU is consistent.

Clause 104 sets out who will be permitted to take decisions in the new regime. It reserves the launch of strategic market status and pro-competition investigations to the CMA board, and further specified regulatory decisions to the board and one of its committees. The committee’s membership is constrained to provide a balance of independence and expertise.

Government amendment 37 amends clause 104 and requires that the continued application of existing obligations at the point of further designation, or transitional arrangements at the end of designation, are decisions reserved for the CMA board or its committees. That will ensure consistency across the introduction of obligations on firms.

Clause 105 sets out the manner in which a notice may be given to SMS firms or other relevant parties in relation to its functions under the digital markets regime. The provision is necessary to prevent parties frustrating investigations by claiming that they have not received a notice or that it has not been given to them in the proper way.

Clause 106 creates a statutory duty for the DMU to consult key regulators on significant proposed actions that engage their regulatory interests where it is relevant and proportionate to do so. Those regulators are the Information Commissioner, Financial Conduct Authority, Ofcom, Prudential Regulation Authority and the Bank of England. That ensures that the DMU can draw on expertise, avoid negatively impacting the interests of other regulators and prevent conflicting interventions.

Clause 107 creates a formal mechanism for the Financial Conduct Authority or Ofcom to make a recommendation to the CMA for it to exercise a significant digital markets function. That will ensure that the FCA and Ofcom, as concurrent competition regulators, have a clear and transparent process to refer cases to the DMU.

Clause 108 extends existing information-sharing provisions in part 9 of the Enterprise Act 2002. It ensures that information can be shared between the CMA and other relevant regulators to help them to carry out their statutory functions. The CMA will be able to disclose information to SMS firms or third parties to enable them to respond to allegations, seek legal advice or make appeals.

Clause 109 gives the CMA a power to collect a levy from firms that have been designated with strategic market status. The CMA will design the levy and publish rules for its administration, laying a draft in Parliament in the process. That allows the CMA to recoup costs associated with delivering the regime, ensuring value for money for taxpayers.

Clause 110 clarifies the extraterritorial application of the digital markets regime and sets out the circumstances in which the CMA can give a notice, such as a penalty notice, overseas. The regime will by default have extraterritorial scope—with certain exceptions to limit the scope to what is strictly necessary. Government amendment 38 corrects a minor gap in the Bill. It allows for a notice requiring the provision of information to be given to a named senior manager or nominated officer who is overseas. This is in circumstances in which the CMA is “considering” whether to impose a penalty on them, rather than only if a penalty has already been imposed on them. It would be necessary if the CMA needed information to determine whether a penalty should be imposed on those individuals for failing to fulfil their role.

Clause 111 ensures that the CMA is protected against legal action for defamation as a result of delivering the digital markets regime. This matches long-standing provision in the Competition Act 1998 and the Enterprise Act 2002. Clause 112 sets out how the CMA must undertake its duties to consult and publish statements online in the course of delivering the digital markets regime. It must have regard to confidentiality and timing, and ensure that consultation materials include relevant background and rationale. That ensures that consultation invites relevant, productive and timely evidence. Clause 113 mandates that the CMA must publish guidance on how it will exercise its powers under the digital markets regime and sets out the relevant requirements. The CMA must consult before new or replacement guidance is published. This ensures that the CMA is transparent about the interpretation of this legislation and its approach to the delivery of the regime.

Clause 114 sets out when an undertaking is part of a group for the purposes of part 1 of the Bill. An undertaking is part of a group if corporate bodies within the undertaking are members of the group along with other corporate bodies. The term “group” is used in some part 1 provisions, in particular in clause 7 in relation to the turnover condition and in chapter 5 in relation to the merger reporting requirements.

Clause 115 is a technical clause, providing interpretations for key terms and concepts used throughout the Bill, to give consistency and legal certainty about their meaning. Government amendment 39 to this clause is minor and technical. It is necessary to make the definition of “relevant service or digital content” in clause 115 consistent with the definition of a digital activity in clause 3(1). I hope that amendments 37 to 39 will be accepted.

New clause 4 would require the Secretary of State to produce an annual report on the operation of the new digital markets regime. The production of such a report by Government would undermine the CMA’s operational independence and could prejudice its enforcement decisions. It is important that the CMA publishes its own annual report, performance report and accounts, which will cover the operation of the digital markets regime. It is right that that is the approach that we take, that we remain with the CMA doing that, and it is right that it is Parliament, rather than the Secretary of State, that holds it to account for that.

Photo of Alex Davies-Jones Alex Davies-Jones Shadow Minister (Digital, Culture, Media and Sport), Shadow Minister (Tech, Gambling and the Digital Economy) 9:45, 27 Mehefin 2023

Clause 102 is incredibly important if the CMA and, subsequently, the DMU are to be able to be an accountable body that consumers and businesses—and parliamentarians—have confidence in. This clause allows the CMA to extend various deadlines in part 1 of the Bill by up to three months where there are “special reasons” to do so. Those may include, for example, illness in the CMA investigation team. These are important provisions to ensure that the CMA is able to extend relevant investigations by up to three months.

We think it reasonable that the clause does not define the exact parameters of “special reasons”. We support a common-sense approach and therefore anticipate that those would include matters such as the illness or incapacity of members of an investigation team that has seriously impeded their work, and an unexpected event such as a merger of competitors. We further support the need for the CMA to publish a notice to trigger an extension under this clause. However, the Minister knows how important it is that these notices are made public, so I hope that he can clarify that that will be the case here.

It is right and proper that subsection (7) outlines the interaction between SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking and needs to extend it, that investigation may not conclude until the original designation has expired, meaning the undertaking would fall outside the regime before the need for continued SMS designation is confirmed. The clause enables the SMS designation to be extended to match the length of the SMS investigation period and is a sensible approach that Labour supports.

We also welcome the provisions around clause 103, allowing the CMA to extend an SMS designation by up to three months. That speaks to the nature of an agile and flexible regime, which we ultimately all want and support. Government amendment 37 prevents decisions about whether and how to exercise the power in clause 17 being delegated to a member of the CMA’s board or a member of staff of the CMA. We consider that to be an appropriate response.

Clause 104 is crucial all round because it explains how decisions will be made under the digital markets regime and has practical applications in establishing exactly how the functions within the CMA will be able to operate when implementing the legislation. Notably, subsections (1) to (5) provide the CMA with the ability to create groups. The CMA must state the function for which such a group is established and the group will be required to fulfil that function. Can the Minister confirm where that information will be reported? Again, it will be helpful for us all to understand how that will work in practice.

We also value the clarifications outlined in the clause, which establish that to be eligible to carry out the functions under subsection (2A), a committee must include at least two CMA board members, which can include the chair. Furthermore, a majority of the committee’s membership must be non-staff or CMA panel members. We welcome the clarification that any changes of this nature would need to be laid before and approved by each House of Parliament before being enacted. Can the Minister confirm whether the Secretary of State will be required to be consulted under the provisions? That aside, we support the clause and believe it should stand part of the Bill.

We support clause 105 and welcome the clarification that a notice may be given to the particular individuals specified in subsections (3) to (5). This is an important clause that will allow the CMA to fulfil its obligations as the regulator. We also welcome clause 106, which outlines the requirements that will ensure the CMA has to consult specific named regulators, and welcome the clarity that those five regulators are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and Ofcom. It is positive that they are outlined in the Bill. They are all established and relevant regulators that are subject to their own vast regulatory regimes, so Labour supports their involvement in assisting the CMA to regulate the regime proposed in the Bill. Again, we feel that subsection (6) is fair and reasonable. We particularly approve the fact that it is proportionate and we are happy to support it.

If clause 106 forces the CMA to consult the specific named regulators, it is only right that clause 107 sets out the formal mechanisms to be exercised under their regulatory digital markets function and that they are in the Bill too. We welcome the clarification on the timeframes, particularly around the fact that the CMA must respond to each relevant regulator within 90 days, setting out what action, if any, it has taken or will take and the reasons for that decision. It is important that those time periods are established in the Bill so as not to delay the CMA in taking action on a firm that is not operating in alignment with the regime.

For transparency purposes, we are also pleased to see the summaries of the CMA’s responses and that they must be published online. I am sure the Minister is pleased that that is included. We will come on to that matter as we address further clauses, particularly clause 112.

We welcome clause 108, which we see as a procedural clause that additionally extends current provisions to enable information sharing between the CMA and the Information Commissioner’s Office where that facilitates the exercising of one of their respective statutory functions, and we support the clause’s intentions. Information sharing must be encouraged between the agencies to allow for a regulatory regime to work in practice and be robust. It is right that the clause makes amendments to the Communications Act 2003 and the Enterprise Act 2002, which we see as vital for the regime to work in practice. We therefore support the clauses and believe they should stand part of the Bill as fully drafted.

Labour fully supports the provisions in the Bill to ensure the CMA has sufficient power to collect a levy from designated undertakings to recoup the costs associated with delivering the digital markets regime. We see that as a positive and effective way of encouraging compliance, but also an important way of generating funds to ensure the sustainability of the digital markets regime more widely. The polluter pays model is commonplace in a wide range of policy areas and it can be immensely effective. We therefore welcome the provisions in full. I do not need to address each subsection individually because the overall message is the same. SMS firms should absolutely pay a levy. For far too long they have got away with having considerable power and profit, and the time for them to have a statutory obligation to support measures such as those outlined in the Bill is well overdue.

We support the provisions in Government amendment 38, which we hope will go some way to assist should penalties have to be invoked by the CMA. The amendment permits notices to be served on people outside the UK if the CMA is considering imposing a penalty. Again, that is appropriate, and the Minister can be assured of our support. We feel that the provisions in clause 110 are fair and in alignment with similar regimes already in place, so we are happy to support it too. This is all becoming very collegiate.

Clause 111 protects the CMA against legal action for defamation as a result of its exercise of functions under the digital markets provisions in this part, and we support it entirely.

We welcome the provisions outlined in clause 112, which confirms the CMA’s duties to consult and publish statements online. As the Minister will be aware, any measures around transparency must factor in an element of consultation and transparency, so we welcome the clarifications that clause 112 affords. Colleagues will note that subsection (1) makes provision for when the CMA consults and publishes a statement. We think that it makes perfect sense. We are happy to support it, and wish to see that transparency echoed throughout the Bill.

Clause 113 is again welcome because it sets out the CMA’s obligation to publish guidance. It is important to have confirmation that the CMA will be able to revise or replace any guidance that it publishes, but must publish the revised or replacement guidance. While we recognise that that could include industry associations with a particular interest in the specific guidance in question, I would be grateful if the Minister would clarify whether others may be consulted in the instance of revised guidance being published? That aside, we support the intention behind clause 113 and believe that it should stand part of the Bill.

Clause 114 is particularly important. In the case of a large corporate group whereby a designated undertaking may be part of a wider body, it is important that that is defined within the Bill and interpreted when used throughout the Bill. Turning to Government amendment 39, we of course support the need to ensure that the definition of

“relevant service or digital content” is consistent with the definition of “digital activity”, so we will support the amendment. We welcome clause 115 and do not disagree with any of the definitions outlined therein. We see them as fairly standard, as long as they are applied with common sense. We therefore fully support the clause.

Lastly, turning to new clause 4, we have already touched on this to some extent in previous debates. The aim of the new clause is clear: we want there to be more transparency over the function of the CMA’s regime. Particularly when it is in its infancy, the information will be extremely useful to businesses, civil society, academics and parliamentarians alike. It will also be important for other jurisdictions to have a meaningful way of understanding the regime, particularly if we want it to be world leading, when considering options for their own legislation.

I hear the Minister’s comments regarding replication of work and the need for the independence of the CMA, but it is right that Parliament has that scrutiny and overview. I would welcome his commitment to ensure that Parliament will have a mechanism by which to review the activity of the CMA via a regular report. If he could commit to me that that will be the case, we will not need to press the new clause to a vote.

Photo of Paul Scully Paul Scully Parliamentary Under Secretary of State (Department for Science, Innovation and Technology)

I thank the hon. Lady for her approach. Let me answer some of her questions. Notices will be made public, and information about the groups will be reported online.[This section has been corrected on 10 July 2023, column 3MC — read correction] Under clause 104, the Secretary of State would not need to be consulted because, again, it is an independent regulator, so mandatory consultation with the Secretary of State is not necessarily appropriate. On clause 113 and who will be consulted on the revised guidance beyond industry, it will be relevant stakeholders, such as SMS firms themselves, other regulators such as Ofcom and the ICO, businesses likely to be affected by the decisions, and consumer groups. A wide-ranging consultation will be required to ensure that the regime works properly.

I think I can give the hon. Lady the assurance that she is looking for on new clause 4. It is really important that Parliament continues to be able to scrutinise the regime effectively. I do not think that it is appropriate to take the approach that the Secretary of State needs to do another form. It is less to do with duplication; it is more to do with the fact that if the Secretary of State is putting forward his or her own report, that might undermine the report that the CMA is doing. The CMA has an annual report, which it will publish at the end of each financial year. It will include a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. That should be enough for Parliament to scrutinise that report and the work of the CMA and the DMU. I am happy to give that assurance that Parliament has that scrutiny and oversight.

Question put and agreed to.

Clause 102 accordingly ordered to stand part of the Bill.

Clause 103 ordered to stand part of the Bill.