Ministers from the Department for Science, Innovation and Technology (DSIT) and the Department for Business and Trade (DBT) have told select members of the House of Lords that the UK’s new Digital Markets, Consumer and Competition bill will not unfairly punish Big Tech companies. Peers raised concerns about specifics of the legislation, which is designed to ensure fair access to digital markets, how it will affect challenger brands and the accountability of the Competition and Markets Authority (CMA), which will be granted more power under the act.
Speaking to the Lords Communications and Digital Committee, Paul Scully, minister for tech and the digital economy, and minister for enterprise, markets and small business, Kevin Hollinrake, were answering questions as part of a review of the legislation, which passed its second reading in May 2023. The bill aims to give more statutory powers to regulators such as the Digital Markets Unit (DMU) to handle Big Tech companies such as Microsoft, Google, Apple and Amazon, which dominate digital services and hold joint roles as both vendors of services and providers of marketplaces where services can be purchased.
As reported by Tech Monitor, MPs had feared that the bill didn’t go far enough in addressing healthy competition in the digital economy. This was repeated by members of the committee, which looked to focus on gaps and weaknesses in the proposed legislation and to raise concerns flagged in previous oral evidence sessions.
Scully told the committee that the bill didn’t aim to “bash” Big Tech but to continue to foster innovation and support challenger brands. He also said that the bill supported a desire from the government to build more scale-ups in the UK, rather than just start-ups which then move abroad or get acquired by larger companies. Both ministers also told the committee that the proposed bill offered more flexibility than other legislation in Europe.
However, the committee told the ministers about the concerns raised by both Big Tech companies and smaller businesses, and that while the bill’s objectives were accepted, the premise was not.
Digital Markets bill excludes legalisation about participation discussions between CMA and Big Tech
After opening questions by the chair of the committee, Baroness Stowell, the discussion turned to negotiation and taking a participatory approach when CMA reaches decisions on the competition.
Baroness Wheatcroft asked the ministers why this type of approach did not appear “on the face of the bill”. She said previous witnesses were concerned CMA would not be incentivised to negotiate with companies if it wasn’t spelt out in legislation.
“You’ve talked about the need for flexibility and for quick solutions, and one of the roots towards a quick solution should be negotiation,” Stowell said to Scully and Hollinrake.
“Some of the witnesses that we have seen are unnerved about the fact that the participatory approach doesn’t appear on the face of the bill and their concern is that if it’s not on the bill, the CMA will be, in the end, reluctant to take that root because of the potential of a judicial review.” She added that she “couldn’t see any reason” why it isn’t spelled out in the bill.
Scully responded that this approach “goes through the thread of the bill” and while it isn’t spoken about specifically, he said the DMU had been set up with the powers and expectation that “they’ll exchange constructively with designated firms and other stakeholders” at every stage of an investigation.
“The process is absolutely designed to support a participative approach including requirements for rigorous consultations across its decisions,” Scully told the committee.
The ministers also said that they believed there was already good dialogue between CMA and stakeholders and that while there was no formal incentive to take a participatory approach, it would be issued as guidance.
Big Tech companies not happy about the move to judicial reviews
Another member, Baroness Healy, told the ministers that the Big Tech companies had provided evidence to the committee that they were unhappy about the legislation moving to judicial review as an appeal standard over a merit review.
Merit reviews are where a court can relook at the evidence in front of it to make its own decision, such as a tribunal or administrative review. A judicial review focuses on the lawfulness of a decision or action made by a public body, as explained by the Courts and Tribunal Judiciary.
Scully said that the departments believed a judicial review was the right approach because it didn’t allow for companies to “play for time”. He said that with a merits review, this could happen and could “drag on for months” and be used as a “legal weapon” against small companies.
“It still does allow you to look at some of the metis of the case without going to the nth degree,” Scully explained. He referenced there had been discussions about following the European Commission’s “judicial review plus” approach, but that the government believed this would cause uncertainty as to how appeals would be conducted.
However, the tech industry association techUK backs such an approach. On its website, it proposes the government looks at the judicial review plus standard for the bill, which would mean a competition appeals tribunal could consider appeals against DMU interventions “on judicial review principles, but take due account of the merits.”
However, Cora Govett, deputy director, digital markets, at DSIT, also told the committee that there were concerns about the amounts of appeals that would be lodged, creating a “slowdown” in the regime. She also said that there was a concern about creating inconsistencies across the regime.
UK digital markets act doesn’t protect small businesses from Big Tech
Another member, Lord Foster, questioned the ministers on anti-competitive leveraging and how the legislation would protect smaller companies from Big Tech using their strong market positions in different markets to exclude them.
“We’ve listened to arguments from small, would-be challenger, companies, they argue that power behind [the bill] isn’t strong enough to provide the protection they believe is needed,” he said.
The protection, in the bill’s clause 29, centres around whether the conduct of a company results in “benefits for users that outweigh the negative consequences for competition.” This can cover lower prices, higher quality goods or services or greater innovation in relation to goods or services.
Scully responded that the decisions taken on the bill were proportionate and that a firm would be restricted in one area so they could enter another.
The public bill committee will be brought to a conclusion on July 18, before going onto its third reading.