Good morning. Thank you, Neil, for being here this morning. You at techUK are in a unique position, representing everyone who should be impacted by this legislation. Will you outline exactly what impact the Bill will have on the breadth of the tech industry from smaller firms to the big challenger firmsQ 108?
As you rightly said, techUK represents the wide breadth of the tech sector. Our members fall broadly into three categories: the likely strategic market status or SMS firms, which will be regulated; their immediate challengers, which stand to benefit the most from the Bill and which I think you will hear from later; and a third group, the wider tech sector, which sees the benefits of the Bill but is perhaps not engaging as deeply as others.
The Bill sets up a structure and confers on the digital markets unit powers to boost competition in digital markets. The way those powers are set out is sound, but how they are exercised is something that happens after the legislation has passed. Ultimately, whether the Bill results in a positive regime depends on a number of things: how the regime has its priorities set; how it is held accountable by this House and by Government; how proportionate the regime is, in terms of when guidance is consulted on and who is engaged with after the scheme is up and running; and how we ensure that the checks and balances in the regime—such as the appeal standard—work for the Bill.
Q How will the Bill ensure that the smaller businesses and start-ups are not unfairly disadvantaged by the existing, big, dominant market players?
The key thing that the digital markets unit will have to do is to ensure that it is actually consulting those companies and engaging with them throughout the process. At the moment, the rules for how the digital markets unit will consult are not set out in legislation—the Bill just gives a duty to consult, and subsequently the digital markets unit will issue guidance on how it will do that—but, ultimately, we want to ensure that those companies are involved at pretty much every single stage of the discussion and that they are able to submit evidence privately to engage with the DMU informally. Competition regulation often uses requests for information, which can be quite heavy-handed tools to extract information from firms, but we think that the DMU will have to come up with a much more sophisticated way of doing its stakeholder engagement, which is likely to involve a blend of panels, stakeholder engagement and those RFIs, to make sure that it does not overburden smaller and challenger firms, which will want to feed in but will be cautious about going through the legal mechanisms.
Q Thank you—you actually outlined my final question, which was on that point. One of the things we have heard as legislators looking at the Bill is about those risks around confidentiality and how some of the smaller firms have wanted to submit evidence, but have felt unable to do so, due to commercial sensitivities, for example. Will you outline that a bit further? How does the Bill need to ensure that safeguarding is in place to protect those smaller firms with commercial sensitivities so that they are not disproportionately disadvantaged?
We have seen this throughout the process of consultation on the Bill and in submitting evidence to the Committee. We have found that smaller and challenger firms, which often have very tight commercial relationships with the larger companies and often rely on and benefit from them for scale and various things, are very sensitive about what they can and cannot submit. The Bill says very little about confidentiality requirements, so the DMU will have to set out in a lot of detail how that is going to work. We really encourage it to ensure that it consults those firms closely, to make sure that there are clear guardrails around what confidentiality marks are put on evidence that is submitted, what could be shared in summaries, and so on. That is going to be absolutely critical to make sure that the DMU can actually gather the information it needs to do its job.
Q I think I am right in saying that you said in your opening remarks that you may have concerns about the appeal standard. If we move to a full merits system, what is to stop huge tech giants, with almost endless resources, being able to tie up any actions that the DMU takes in the courts for a long time and, in doing so, providing a big deterrent to the DMU taking action in the first place?
There is a risk of that, so we have put forward a position that aligns with what the Government want, which is an appeal standard that is principally based on judicial review principles, but has the flexibility to consider the different requirements of the case. Both techUK and the Government have pointed to the standard used by Ofcom as one that would be suitable in this case. The issue is that we are not sure that with the way the Government are applying the standard in the Bill, it will actually meet that test. As far as I understand it, the Government have set out a legal position that the appeal standard will be flexible because the Competition Appeal Tribunal will be able to look at human rights law, as well as private property rights, to consider how that standard will flex. We have tested that legal argument very widely with members—in-house legal counsel as well as other lawyers—and, to be blunt, a very limited number of people share that view.
Ultimately, what we want to do is work with the Government to see where we can go further to provide additional clarity on how that appeal standard would work—what the flex would look like. Ultimately, the standard will have to principally sit in JR principles, but have that flex higher up.
The point you made about speed is also hugely important. We set out a position saying we would like to see a standard that makes sure that any appeals are limited to about six months in length, because these are very fast-moving markets. If the standard means that things are bogged down, you know that the market might move on and the benefits might not be conferred across. We understand why hard limits might not be possible as part of the regime, but you could take steps in the Bill to try to encourage the courts to move a bit quicker, especially in more dynamic or high-impact cases.
Q But you do accept that there is a risk of a greater deterrent to the DMU being able to take action against these big companies.
Q Thank you for the brevity of your answer. The other thing that we have heard from some of the people likely to be affected by SMS status is about the impact on innovation, for example. It has been said to us that they feel that they would have to go to the DMU or the Competition and Markets Authority for permission to innovate. Is that something you recognise from reading the Bill?
It is a concern that has been raised. There is nothing in the legislation that would mean that that was what happened. It is going to rely much more on how the digital markets unit itself exercises its powers. I think that if we can make sure that the regime is proportionate, is accountable to Parliament and has a pro-innovation focus, we can get over that. But it could happen. It is just that it is much more dependent on the subsequent guidance and the role that the DMU itself plays.
Q Sure, but the criterion that it can intervene really only where there is entrenched market power should be a protection against those worries about innovation.
If the digital markets unit, as I think the Government and the CMA intend, is focusing on a small number of firms with very significant market share in a select number of markets, then yes, that will be the case. However, some concerns have been brought by other companies, which are perhaps leading in their market but would not consider themselves as having a strategic position or causing serious consumer harms and which look at the Bill and think, “At its widest possible scope, I could be included.” That is why we have to make sure that, in exercising the powers, the regime is being held to account.
Mr Ross, we will now have a quickfire round, because we have you for only another five minutes and there are three Members seeking to ask questions. It will be one question each and one answer each.
We put out a position paper ahead of the Bill being published and we did not argue in favour of full merits; we argued in favour of what is often referred to as a judicial review-plus system, which is a blended system that gives a bit more flexibility for the CAT to decide what factors to take into account.
Q Okay, but the bit that I am really interested in is how you could contain an appeals process within six months if you were going to look, even in any element, at the merits.
I am not 100% sure of exactly how it would work in practice. We are just reporting back that what our members are really keen to see happen is that they move forward at speed. There is a lot of debate about exactly how you speed up that process, and we are pretty open to what solutions might be brought forward.
I think there is a balance to be struck depending on what the case is and what is being discussed. Ultimately, the aim would be speed and flexibility. There are going to be trade-offs between the two, depending on what is happening. We want to give the CAT as much discretion as it needs to make that judgment, depending on what is being put before it. Because this regime has enormously flexible and very invasive powers at the upper end, we do not know exactly what kind of cases are likely to be brought forward or discussed. That is why we will want that focus on flexibility as well as speed.
This follows on from that question. Do you think the Bill is designed with sufficient flexibility for the CMA and the digital markets unit to respond to the changing nature Q of the sector? Five years ago some of the things we have today just did not exist. What is your view on that?
Yes. Sorry to repeat points I have made before. I think it depends on exactly how the DMU exercises the power. They have to look ahead five years when making an SMS designation, which puts a lot of pressure on the digital markets unit to make an assessment about how a market is going to be used.
It is as much as five years; it could be longer. It is really how the digital markets unit looks at that. Companies in the broader sector would be given a lot of certainty if the DMU came out fairly early on and set up a priority list of where it is likely to look first. There is quite a good precedent in the Communications Act 2003 of the reporting powers conferred on Ofcom. I know the CMA has some reporting capabilities, but given the wide-reaching powers of the Bill, it might make sense to also think about applying the same standards to the digital markets unit.
You have mentionedQ a few times the importance of accountability to Parliament. I guess that needs transparency so you can get scrutiny. Do you think there is adequate accountability and scrutiny in this Parliament? How does it compare with other Parliaments?
With this Parliament, the CMA is here quite a lot and so are the other regulators, so there is regular scrutiny of the regulators themselves. As the various different Bills go forward, whether that is the Online Safety Bill, the Digital Markets, Competition and Consumers Bill or the Data Protection and Digital Information (No. 2) Bill, we might have to think again about exactly how we are scrutinising those interrelated bits of digital regulation. That is a decision for this House and how you want a change of structures. It would be important to make sure—
Q Have you looked at how other Parliaments scrutinise their regulators in this space? Is there best practice that we should be looking at? I recall my time in Europe, when we had much bigger Committees that held regulators to account, often much more regularly and with bigger Committees.