Digital Markets, Competition and Consumers Bill

Public Bill Committee, 27 June 2023.

Philip Hollobone (Conservative, Kettering)

Before we begin, I remind Members to please switch electronic devices to silent. There is to be no food or drinks, except the water provided. Please send speaking notes to hansardnotes@parliament.uk.

Clause 91 - Destroying or falsifying information

Philip Hollobone (Conservative, Kettering)

With this it will be convenient to discuss the following:

Clauses 92 and 93 stand part.

Government amendment 34.

Clauses 94 to 96 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Let me cover the criminal offences in the regime, which largely mirror existing powers that the Competition and Markets Authority has in the Competition Act 1998. Criminal liability is important for deterring serious acts of misconduct in the context of information gathering and compliance monitoring, and will help to ensure that the digital markets unit can access relevant information.

Clause 91 makes it a criminal offence for an individual or firm to intentionally or recklessly destroy information, conceal information, provide false information, or cause or permit any of those actions. Those offences apply in relation to any of the powers provided for in chapter 6, which concerns information gathering and compliance reports.

Clause 92 makes it a criminal offence for a person to knowingly or recklessly give false or misleading information to the DMU in connection with any of its digital markets functions. It is also an offence for a person to knowingly or recklessly give false or misleading information to another person, knowing that it will be used by the DMU.

Clause 93 makes it a criminal offence for an individual to intentionally obstruct an officer of the DMU when lawfully entering a premises with or without a warrant.

Government amendment 34 seeks to clarify that named senior managers for information requests and nominated officers cannot be held criminally liable for not fulfilling their duties in those roles. As drafted, clause 94(2) broadens the definition of an officer of a body corporate. That would mean that individuals assigned to those roles could risk facing criminal proceedings on the basis of their assignment to the role. It has always been the policy intention that a named senior manager or nominated officer should face a civil penalty only where a firm with strategic market status has failed to comply with a relevant information request or compliance report and where the named individual failed, without reasonable excuse, to prevent that failure from occurring. The amendment would not prevent a senior manager or a nominated officer from facing criminal proceedings if they happen to also qualify as an officer of a body corporate under clause 94. I therefore hope that the Committee will support the amendment.

Clause 94 sets out that, in certain circumstances, where a body corporate commits a criminal offence, an officer of the body corporate can also be held criminally responsible. An officer of a body corporate can be, but is not limited to, a director, manager or secretary. An officer can be held criminally liable where the body corporate commits a criminal offence and the offence is attributable to that officer’s consent, connivance or neglect on their part. That will help to encourage officers in firms to take personal responsibility for their actions and will ensure that they are held accountable for any serious information offences.

Clause 95 limits the extraterritorial application of certain offences in the Bill, and I will set out our wider approach to extraterritoriality when we debate clause 110. Specifically, clause 95 states that a person cannot commit any of the part 1 criminal offences unless they have a UK connection, which is established when the person is a UK national, is habitually resident in the UK, or is a body incorporated under UK law. We have carefully considered the options and implications of restricting the extraterritorial application of criminal offences in this way. Although it is crucial that the CMA may apply its powers extraterritorially, they must be used only when strictly necessary and when a sufficient connection exists with the UK. In circumstances in which the person does not have a sufficient connection with the UK for the purpose of committing an offence, the CMA will still be able to enforce breaches of information requirements using civil penalties. That approach will ensure that, in exercising its powers, the CMA is respectful of the territorial jurisdiction of other nations.

Finally, clause 96 sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under clauses 91 to 93. Any person found guilty of one of those offences is liable on summary conviction to a fine. In England and Wales, that will be of an unlimited amount, and in Scotland or Northern Ireland it will be up to the statutory maximum. On conviction on indictment, a person is liable to imprisonment for up to two years, a fine or both.

Alex Davies-Jones (Labour, Pontypridd)

I welcome the clauses in this grouping that outline the criminal offences, as the Minister has explained. We welcome their inclusion for clarity, and we are also grateful that they broaden the scope of the Bill to include specific provisions, particularly in clause 94.

We support the clarity and intention of Government amendment 34. It is important that the term “officer” has its usual meaning in relation to offences committed by officers as well as bodies corporate. This is an important clarification and we are grateful to the Minister for tabling the amendment.

Clause 94 - Offences by officers of a body corporate etc

Clause 97 - Director disqualification

Philip Hollobone (Conservative, Kettering)

With this it will be convenient to discuss the following:

Government amendments 35 and 36.

Clauses 98 to 101 stand part.

Paul Scully (Conservative, Sutton and Cheam)

I will now cover the remaining enforcement measures in the regime, and the appeals process. Clause 97 gives power to the DMU to apply to the court to disqualify a director of a UK-registered company that forms part of a firm with strategic market status, where that firm has breached the digital markets regime. That will allow the DMU to use the Company Directors Disqualification Act 1986, as the CMA does currently under the Competition Act 1998, when an SMS firm infringes the regime and the director’s conduct makes them unfit to be involved in the management of a company. That helps to protect UK businesses and the public from individuals who abuse their role and status as directors.

Government amendment 35 clarifies that costs relating to a court order under clause 98 can be made against any person that has breached the relevant requirement, whether or not they are an undertaking. The amendment changes the wording in subsection (3) to reflect the rest of the clause, which applies to persons—in practice, meaning a legal entity forming part of an SMS firm. I hope the Committee supports the amendment.

Government amendment 36 seeks to clarify in clause 98 that where a firm is responsible for the failure to comply with a relevant requirement, a costs order can be made against any officer of the relevant firm.

Clause 98 allows the DMU to apply for a court order where an SMS firm fails to comply with a regulatory requirement and, where relevant, a subsequent order or commitment intended to bring them back into compliance. A breach of a court order is a serious offence that can eventually lead to an unlimited fine and/or imprisonment for officers of the undertaking in question if it is not complied with. The threat of a court order is a key backstop for ensuring SMS firms comply with the regime.

Clause 99 makes explicit provision to allow parties to seek redress privately if they suffer harm or loss when an SMS firm breaches a requirement imposed by the DMU. Redress will be available when an SMS firm breaches a conduct requirement, pro-competition intervention or commitment to the DMU.

Clause 100 sets out that the CMA’s final breach decisions are binding on the courts and the Competition Appeal Tribunal to which redress claims can be made. The court or tribunal will only consider what a suitable remedy would be. That will encourage harmed parties to assist the DMU during investigations into suspected breaches of the regime.

Clauses 99 and 100 strike the right balance of ensuring there is a clear and effective route to redress, while ensuring that the regime’s focus is on public enforcement.

Clause 101 provides that decisions of the DMU, made in connection with its digital markets functions, can be appealed to the Competition Appeal Tribunal. When deciding these challenges, the CAT will apply judicial review principles. Valid grounds for appealing decisions of the DMU could include challenging whether it acted lawfully and within its powers, applied proper reasoning or followed due process, as well as, in some circumstances, whether the DMU’s decision was proportionate. That is with the exception of decisions relating to mergers, which will be brought under the existing process for merger appeals set out in the Enterprise Act 2002. That will ensure that there is a consistent appeals regime for all merger decisions.

Judicial review will allow for appropriate scrutiny of the DMU’s decisions in the digital markets regime, ensuring that the DMU is accountable for those decisions, that they are fairly and lawfully taken, and that the rights of businesses are protected. I am sure we all remember the oral evidence: the majority of people in front of us were clear that this was the right approach, and was proportionate.

Alex Davies-Jones (Labour, Pontypridd)

Clause 97 is important in that, as the Minister said, it enables the disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. Labour sees that as an important step in ensuring that individuals who have not abided by the terms of this regime are not able to continue in their role. The clause specifically inserts new text into the Company Directors Disqualification Act which allows for these provisions. We welcome that this disqualification can be for up to 15 years—a significant yet fair period—and support the Government’s approach. We therefore support clause 97 in its entirety and think that it should stand part of the Bill. I am pleased to confirm that we also support Government amendments 35 and 36.

I will now move on to clauses 98 to 101. On clause 98, we particularly agree with the logical step set out in subsection (1). Its clarification means that, in the event of any initial breach of a conduct requirement that occurs before an enforcement order has been put in place or a commitment has been accepted, it cannot be enforced with a court order. We also agree with the intentions of subsection (3). Again, these are sensible approaches which we support. On the whole, we believe clause 98 to be an important step in establishing and rooting the CMA’s powers on a statutory footing. For that reason, we are happy to support it standing part of the Bill.

A fair regulatory regime must include provisions around seeking compensation, so we welcome clause 99. We particularly welcome subsection (2). We further welcome the clarity that subsection (4) affords. Again, these are simple clauses that we see as logical and sensible. We are happy to see their inclusion.

I now come to the most important clause in the Bill: clause 101. The Minister will be pleased to know that I have plenty to say on it. Subsections (8) to (10) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. That is an incredibly important point and one which the Government must maintain. The DMU will ultimately have the power to make pro-competitive interventions to reduce SMS firms’ market power and to review more of their mergers. That means that they will be able to make significant changes to SMS firms’ business models with the objective of opening up their ecosystems and levelling the playing field for other businesses. The benefits of doing so are significant, and I am sure we will touch on them in sessions to come.

In the current version of this Bill, the standard of review that applies to DMU decisions is the judicial review standard generally used for authorities that make forward-looking assessments, rather than the “merits” standard used for certain competition law enforcement decisions by the CMA. That means that parties will be able to apply to the Competition Appeal Tribunal to review the legality of the DMU’s decisions, focusing on the principles of irrationality, illegality and procedural impropriety. That is an extremely important point and is consistent with other regimes, so the Government must not bow down to pressure here and adopt a “merits” appeals approach. As the Minister quite rightly said, we heard from countless witnesses during our oral evidence sessions who said the same.

We know that judicial review appeals are more streamlined than merits appeals and they can last a matter of days, rather than weeks, years or even decades. Under this Government, our courts are already facing significant backlogs—perhaps the less said about that the better—but there is no reason why we should subject this regime and the appeals principle to even further delay. We recognise the pressure that the Government are under here; clearly, potential SMS firms and their advocates oppose the adoption of the JR standard. It is obvious that a company that may be negatively impacted by this new regime would seek to obstruct or delay it by arguing for an appeals process that incorporates a consideration of the merits of the case.

However, Labour strongly believes that the current drafting is fair and well aligned with other regulatory regimes. For far too long, big tech has had the ear of this Government and has been able to force the hand of many of the Minister’s colleagues when it comes to online safety provisions. The Minister must reassure us that that will not be the case. I look forward to his confirmation.

Paul Scully (Conservative, Sutton and Cheam)

I appreciate the hon. Lady’s approach to the appeals standard, which she has taken in regard to the measures throughout the Bill. The Government speak to larger companies and smaller challenger companies, because it is really important that we get this right. I can assure the hon. Lady that there is no way we are going to weaken the appeals structure. We will always make sure that we listen and do things fairly. In no way will the structure be watered down such that challenger tech cannot come through. It is important we ensure that the Bill in its final form is the best it can be and is fair and proportionate.

Clause 98 - Enforcement of requirements

Clause 102 - Extension etc of periods

Philip Hollobone (Conservative, 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.

Paul Scully (Conservative, Sutton and Cheam)

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.

Alex Davies-Jones (Labour, Pontypridd)

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.

Paul Scully (Conservative, Sutton and Cheam)

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.[Official Report, 10 July 2023, Vol. 736, c. 3MC.] 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.

Clause 104 - Exercise and delegation of functions

Clause 110 - Extra-territorial application

Clause 115 - General interpretation

Clauses 116 - Removal of requirement for agreements etc to be implemented in the UK

Philip Hollobone (Conservative, Kettering)

With this it will be convenient to discuss the following:

Clauses 117 to 121 stand part.

That schedule 3 be the Third schedule to the Bill.

Clauses 122 and 123 stand part.

Clauses 134 and 135 stand part.

Paul Scully (Conservative, Sutton and Cheam)

I hope my voice will stand up to this level of scrutiny. Part 2 of the Bill focuses on the UK’s existing competition regime. First, I will explain that while the CMA is the principal regulator responsible for the public enforcement of the prohibitions in part 1 of the Competition Act 1998, its functions are also exercisable concurrently by sector regulators, such as Ofgem and Ofcom, among others. The measures in clauses 116 to 120 and clause 135, and when we reach them clauses 136 and 137 and schedules 8, 9 and 11, affect the CMA and sector regulators. For the sake of brevity, I will just refer to the CMA.

Clause 116 extends the territorial reach of the chapter 1 prohibition in the Competition Act 1998. The prohibition relates to anti-competitive agreements, decisions by associations of undertakings or concerted practices, hereafter simply referred to as agreements. The chapter 1 prohibition captures agreements that have as their object or effect the prevention, restriction or distortion of competition within the UK, and which may affect trade within the UK. Currently, it is limited to agreements that are, or are intended to be, implemented within the UK. The extension in reach of the chapter 1 prohibition means that agreements implemented, or intended to be implemented, outside the UK are also captured, but only where they would be likely to have immediate, substantial and foreseeable effects on trade within the UK.

Clause 117 introduces a new duty to preserve documents on persons who know or suspect that an investigation is being, or is likely to be, carried out under the Competition Act 1998. The duty will apply from when a person knows or suspects that an investigation by the CMA is under way or likely to occur. Where a person has a reasonable excuse for not complying with the duty, no liability for a penalty will arise. A reasonable excuse could include something out of an individual’s control, such as an IT failure.

Clause 118 strengthens the CMA’s powers to require the production of electronic information stored remotely—for example, in the cloud—when executing warrants to enter business or domestic premises. Under this reform, the CMA will be able to require the production of information for the purposes of its investigation without needing to demonstrate when making the request the specific relevance of the particular dataset to be produced. It will then be able to take copies or extracts only of information that is relevant to the investigation. The CMA will also be able to operate equipment to produce remotely stored information itself. Clause 134 makes similar amendments to the CMA’s power to require the production of electronic information when executing a warrant during an investigation into a suspected criminal cartel offence under part 6 of the Enterprise Act 2002.

Clause 119 amends part 1 of schedule 1 to the Criminal Justice and Police Act 2001, to include the power of the CMA to undertake an inspection of domestic premises, under section 28A of the Competition Act 1998. That means that when the CMA undertakes an inspection of domestic premises, it will have access to the same seize and sift powers as are already available to it when it inspects business premises under a warrant.

Clause 135 also concerns the CMA’s investigative powers. First, it expands the CMA’s power to require persons to answer questions for the purposes of a Competition Act 1998 investigation, so that it applies regardless of whether the person has a connection to a business under investigation. The CMA will be able to require individuals to answer questions only where they have information that is relevant to an investigation. Secondly, the clause amends the CMA’s powers to require individuals to answer questions across its Enterprise Act 2002 markets and mergers and Competition Act 1998 functions, so that it can specify that interviews for those purposes should take place remotely.

Clause 120 amends the standard of review applied by the Competition Appeal Tribunal in appeals against interim measure decisions from full merits to judicial review. Interim measures are temporary directions that the CMA has the power to give during an investigation under the Competition Act 1998. To be an effective tool in fast-moving modern markets, it is essential that interim measures can be implemented efficiently. Judicial review will provide a flexible and proportionate standard of review, ensuring the CMA is held accountable appropriately for its decisions.

Clause 121 introduces schedule 3 to the Bill, which amends the Competition Act 1998 to empower the Competition Appeal Tribunal to grant declaratory relief in private actions claims under the Competition Act 1998. Declaratory relief is a remedy that involves a court making a legally binding statement on the application of the law to a set of facts.

Clause 122 gives the Competition Appeal Tribunal, the High Court of England and Wales, the Court of Session and sheriff courts in Scotland and the High Court in Northern Ireland the ability to award exemplary damages in private competition claims. This will help deter and punish particularly egregious conduct and ensure that those impacted by the most reckless breaches of competition law can be awarded additional damages.

Clause 123 amends section 71 of the Serious Organised Crime and Police Act 2005 to designate the CMA as a specified prosecutor. This designation will allow the CMA to enter into formal agreements with an offender who has assisted or offered to assist its criminal cartel offence investigations. For example, if it considered it appropriate, the CMA could agree not to use specified information against them in any criminal proceedings. Agreements to provide assistance can also be taken into account by the courts when sentencing an offender, or their sentence could be referred back to the court for review. These measures do not enable the CMA to offer immunity from prosecution.

Alex Davies-Jones (Labour, Pontypridd)

Part 2 focuses on the competition elements of the Bill. I am pleased to see clause 116, which expands the territorial reach of parts of the Competition Act 1998. Labour recognises the importance of ensuring that legislation already on the statute book is aligned with the intentions behind the Bill, because we understand that regulation of our digital markets will draw on existing competition law. We therefore welcome the clause, which will expand chapter 1 of the 1998 Act. The chapter 1 of the 1998 Act considers only undertakings and decisions that might affect trade within the UK, and which have as their object or effect the prevention, restriction or distortion of competition. At the moment, those behaviours are prohibited only where they are, or are intended to be, implemented in the United Kingdom, but we need to consider the impact of agreements, decisions and practices that might affect trade within the United Kingdom. Subsection (2) of the clause will replace the existing section of the 1998 Act to ensure that a consideration of the effect on trade will be considered. That is particularly important in the context of digital markets because they operate on a global level.

The clause goes some way to address the lack of futureproofing in the Bill more widely. The Minister knows my thoughts on that, and knows the Bill should go further in that regard. That aside, we welcome subsection (3), which will repeal the existing equivalent in the 1998 Act. The introduction of the qualified test will ensure that UK trade and businesses and consumers based in the United Kingdom, are protected from any detrimental effects of anti-competitive conduct, regardless of where that conduct takes place. That is welcome, and we consider the measure to strike a positive balance.

We welcome the clarity and the changes to the 1998 Act that will bring important provisions of the Bill into line with existing legislation. We have therefore not sought to amend the Bill, and we support those measures being part of it.

Clause 117 is important in that, once again, it will amend part 1 of the 1998 Act. We know that big companies can often be smart in concealing, or even overloading, information relevant to regulatory regimes, and we have seen that happen time and again when it comes to online safety. Labour does not want the same detrimental behaviours to be allowed to continue within this regime. We therefore welcome the provisions in the clause, particularly proposed new section 25B, which sets it out that the duty applies where

“a person knows or suspects that an investigation by the CMA… is… or is likely to be carried out.”

The inclusion of a person “suspecting” is important, and, in theory, it will push companies to abide by their duties. Recently, we have seen those at the heart of Government in the news owing to their failure to produce vital documents in investigations of the covid-19 pandemic, so it is very welcome indeed that the Government appear to have learned their lessons and worked to ensure that designated companies will not be able to circumvent the regime, as a former Prime Minister has attempted to do.

Let me get back to the Bill and the matters at hand. In practice, those duties will arise where a business receives a case initiation letter from the CMA, so it will be perfectly aware that its conduct is under investigation. Such duties might further arise when, for example, an individual working for a business is aware that a customer has reported their suspicions of price fixing, and that the customer has been interviewed by the CMA, or members of an anti-competitive agreement have been “tipped off” that a member of the agreement has blown the whistle to the CMA. Those are important clarifications, which we welcome. We therefore support their inclusion in the Bill.

We support clause 118, which specifically amends sections 28 and 28A of the 1998 Act, and we support the clarity with respect to the execution of such warrants—for example, a named CMA officer has the power to require the production of information that is held electronically and is accessible from the premises. It is a positive step to have these amendments to the 1998 Act, which will expand the powers of the court or the CAT to grant a warrant to the CMA based on the fact that there are reasonable grounds to suspect that there are documents relating to an investigation that are accessible from the premises, when the other criteria set out in the section are met. Those powers will apply to any information stored electronically, and we hope and expect that the provisions of the clause will rarely be used. Despite that, we fully support their inclusion. It is right and appropriate that businesses and other jurisdictions looking closely at the Bill have a sense of the process that will result in the event of the CMA being forced to act on a warrant. The clause and others in this part of the Bill are an important part of ensuring compliance, and we therefore welcome the provisions in full.

Clause 119 is, once again, an important clause that will amend existing legislation. The powers of seizure conferred by section 28 of the 1998 Act are already specified for the purposes of section 50 of the Criminal Justice and Police Act 2001, so the amendment will align the powers available to the CMA whether it is inspecting business or domestic premises under a warrant, and it will make consequential changes in the light of those made by clause 118. These practical clauses will make important changes to legislation to bring other provisions in line with the Bill.

Clause 120 is incredibly important because it will change the standard of review to be applied by the CAT on appeals against interim measures directions under section 35 of the 1998 Act. The Minister knows that Labour feels passionately that judicial review is the correct approach, so again I press him not to weaken the measures in the other place. As we know, under section 35 of the Competition Act 1998, when an investigation has been commenced but not completed, the CMA has the power to issue directions, known as interim measures, for the purpose of preventing significant damage to a particular person or category of person or protecting the public interest. Clause 120(1) amends section 46 of the Competition Act 1998 to make it clear that a decision either to make or to not make interim measures can be appealed to the CAT by any party to an agreement in respect of which the CMA has made such a decision. We welcome that clarification. Subsections (2) to (4) contain important points, which we also welcome. I would be grateful if the Minister could reassure us that those provisions will not be weakened and that the appeals process will not be reduced to a merits-based process in the other place. To be clear, if I have not already been clear, we fully support clause 120 and its intentions.

We welcome the provisions in schedule 3, which gives the CAT the power to make legally binding statements on the application of the law to a particular set of facts. Particularly helpful is paragraph 4, which inserts proposed new section 47DA into the Competition Act. The proposed new section provides clarification and enables legislative parity across the UK, particularly with Scotland and England and Wales. That is welcome for the legislation to work as intended.

I do not feel that I need to go into any further detail about our support for the other clauses in the grouping, but I wish to make a point about clause 134 in regard to the Serious Fraud Office’s investigations of suspected cartel offences. The clause will enable a named CMA officer to require the production of information that is held electronically and accessible during an inspection under a warrant. It would also expand the powers of the High Court and the CAT in England and Wales and Northern Ireland, and the sheriff in Scotland, to grant a warrant if necessary. We support those provisions in their entirety. It is important that the CMA is able to act in the most serious of circumstances.

Finally, Labour supports the intentions of clause 135; of course there should be provisions in the Bill about the attendance of witnesses, as outlined in the clause. We see those as sensible and a key focus if the regime is to work in practice.

Clause 124 - Relevant merger situations and special merger situations

Philip Hollobone (Conservative, Kettering)

With this it will be convenient to discuss the following:

That schedule 4 be the Fourth schedule to the Bill.

Clause 125 stand part.

That schedule 5 be the Fifth schedule to the Bill.

Clauses 126 to 128 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Chapter 2 of part 2 upgrades and refines UK merger control to ensure it remains the best in class. Clause 124 and schedule 4 amend the thresholds for merger review to focus the UK’s merger regime on reviewing the transactions that have the potential to have the most marked impact on competition in UK markets.

The Bill makes three changes to those thresholds. First, it introduces a new acquirer-focused threshold, which gives the CMA clear jurisdiction over transactions in which a very large business with a UK turnover of more than £350 million, and at least a 33% share of supply, acquires another business. The new threshold will allow the CMA to review potentially harmful transactions—for example, a business with significant market power in one part of a supply chain acquiring a business in another and then being able to leverage its market power across that supply chain.

Secondly, the Bill increases the turnover test level from £70 million to £100 million. That adjustment limits merger review of cases that are less likely to be harmful, maintaining the balance intended when the UK’s merger regime was created. Thirdly, it introduces a safe harbour for transactions where all parties have a UK turnover of no more than £10 million. For the first time, therefore, small and micro enterprises merging with each other can be certain that they will not be captured by UK merger control.

Clause 125 and schedule 5 introduce a fast-track procedure to allow certain mergers to be expedited to an in-depth, or phase 2, investigation. That is intended to increase flexibility and deliver more efficient merger investigations. Now, when the CMA investigates a merger, initially it has to undertake a phase 1 investigation lasting up to 40 working days before it can refer the transaction for an in-depth phase 2 investigation. Merger parties, however, may be aware early in the process that their merger is likely to require an in-depth investigation by the CMA. In such cases, moving quickly to phase 2 will significantly speed up the overall process. Let me be clear: the fast track is not a suitable process for all mergers that the CMA reviews. However, in some cases, it will be a valuable tool to save time and resources for all involved, especially if parties request a fast track early on.

Alex Davies-Jones (Labour, Pontypridd)

Labour welcomes the provisions in the clause which establish that transactions within jurisdiction can be reviewed by the CMA, although no obligations or requirements are imposed on businesses by being in scope. Schedule 4 introduces the new acquirer-focused threshold, as well as introducing a small merger safe harbour that is primarily targeted at reducing the regulatory burden faced by small and micro businesses—the burden that we heard about in our evidence sessions. We support the clause standing part.

Schedule 4 makes several changes to the thresholds, which determine what transactions are within the jurisdiction of UK merger control. As I have noted already, the UK’s merger control regime is voluntary, meaning that there is never on obligation to notify a transaction to the CMA. However, when the existing jurisdictional thresholds in the Enterprise Act 2002 are met, the CMA may review a transaction even if it is not notified. The CMA has such jurisdiction if: the target’s UK turnover in its most recently completed financial year exceeded £70 million; or the parties have a combined share of supply of 25% or more in relation to any product or service in the UK or a substantial part of the UK. This schedule will clarify some significant changes to those thresholds, which Labour welcomes.

Schedule 4 introduces a new threshold that will grant the CMA jurisdiction to review transactions where one party has a UK share supply of at least 33% and UK turnover exceeding £350 million. We see the new threshold as largely capturing killer acquisitions, in which a larger firm acquires a smaller and possibly innovative firm, potentially with a view to eliminating the threat of future competition. The CMA’s existing 25% share-of-supply threshold has already shown itself to be flexible in capturing many such transactions, but it is estimated that the new threshold will lead to an increase of between two and five phase 1 cases per year. That is to be applauded.

The new £350 million threshold is aimed at expanding the CMA’s jurisdiction, but other sections of schedule 4 seek to reduce the burden on merging companies by removing certain transactions from the CMA’s jurisdiction. By increasing the target turnover threshold from £70 million to £100 million, it is estimated that the changes to the turnover test will lead to a reduction of two or three phase 1 cases per year. In addition, the Government have proposed an interesting solution with the introduction of a safe harbour threshold to the existing share-of-supply test where, even if the 25% share of supply threshold is met, the CMA would not have jurisdiction if no party to the transaction had more than £10 million of UK turnover.

Labour recognises that it would be inappropriate to burden the CMA unnecessarily, but we are keen to have an understanding of how schedule 4 will operate in practice. Has the Minister considered introducing an annual reporting mechanism that would allow for more transparency on whether the approach is working? That aside, we certainly and carefully support the intentions of this schedule.

We welcome the provisions of clause 125 and are pleased to see that particular attention has been given to merger situations. Labour recognises that designated companies often buy other companies or merge with them, so it is only right that the CMA is empowered with the appropriate tools to investigate in such circumstances, where necessary. As we know, at present the UK’s merger control regime is voluntary, meaning that there is never an obligation to notify the CMA of a transaction. However, as I have said, when the thresholds in the Enterprise Act are met, the CMA may review a transaction despite not having being notified of it.

Clause 125 is relevant because it amends part 3 of the Enterprise Act to enable the CMA to fast-track a merger to an in-depth phase 2 investigation if it receives a request from the parties involved to do so. That is an important step in streamlining merger review procedures and timelines by removing certain statutory duties on the CMA that currently limit the benefits and use of the existing, non-statutory fast-track procedures. This fast-track process gives the CMA more flexibility to deliver quicker and more efficient merger investigations without prejudicing the quality of the review. We welcome the clarifications in clause 125 and support its standing part of the Bill.

We welcome schedule 5, which amends the Enterprise Act to enable the CMA to fast-track these mergers. In particular, we support the clarification that the CMA may launch a phase 2 investigation only if it believes that a completed or anticipated merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom. We also support the clarification of the circumstances in which the CMA can accept a fast-track reference request.

When making these decisions, the CMA must have regard to whether the merger could raise public interest issues or whether a special public interest intervention has been launched under provisions in the Enterprise Act, to ensure that no case is unduly fast-tracked. Schedule 5 is important and will be central to ensuring the CMA can work at pace in the case of any merger requiring investigation. We welcome and support it.

Labour fully supports the intentions of clause 126. The timetable for phase 2 investigations is important for the timely resolution of merger investigations, and we believe the approach outlined to be sensible. As it stands, section 39 of the Enterprise Act, which outlines time limits, requires the CMA to publish its report on a merger reference within 24 weeks of the date of the reference. Clause 126(2) amends that provision to give the CMA the power to extend the period if necessary. We welcome the clarity that the length of an extension has to be agreed between the CMA and parties involved in the potential merger.

We also acknowledge that, while the Bill does not specify circumstances in which the CMA and the parties involved in a merger can agree an extension, an extension is most likely to be helpful in support of early consideration of remedies or in multi-jurisdictional mergers that are being reviewed in other countries in parallel to the UK. We welcome that distinction. Labour has consistently said that for the regime to work in practice it must be flexible. We see clause 126 as an important step towards that aim and are therefore happy to support its inclusion in the Bill.

As I said with respect to clause 126, Labour supports flexibility to extend time limits, and we feel that is particularly important where there is a public interest to do so. That is why we support clause 127. The clause amends chapter 2 of part 3 of the Enterprise Act, which sets out that the Secretary of State may intervene in the consideration of a merger where the Secretary of State believes it raises a public interest consideration that needs to be taken into account. We feel that this is an appropriate and proportionate way of ensuring accountability for public interest interventions, and that the Secretary of State should be empowered to do so. We therefore support the intentions of clause 127 and, again, believe that it should stand part of the Bill.

Finally, clause 128 replaces the obligation on the CMA in section 96(5) of the Enterprise Act to publish the latest form of the merger notice

“in the London, Edinburgh and Belfast Gazettes”

with an obligation to publish it online. We welcome that transparency. The Minister knows my views on transparency with respect to the Bill more widely. I wish that provision about online publication was replicated elsewhere in the Bill, so that information is available to anyone who wishes to see it. We welcome clause 128 and hope to see it replicated.

Paul Scully (Conservative, Sutton and Cheam)

Indeed, a lot of the publication is done online, as we have discussed, even if that is not stated specifically in the Bill. I hope the hon. Lady takes heart in that.

The hon. Lady asked specifically about schedule 4 and safe harbours. Clearly, we would expect the CMA and the Government to review the merger review thresholds regularly, and there are powers to amend the thresholds if and when it is considered appropriate to reflect economic developments or, indeed, because of the experience of enforcing the thresholds, as she rightly said. The CMA board is accountable to Parliament, as we have described. We expect that, through its annual plan and performance reports, Parliament will be able to scrutinise the decisions that have been taken.

Clause 129 - Market studies: removal of time-limit on pre-reference consultation

Philip Hollobone (Conservative, Kettering)

With this it will be convenient to discuss the following:

Clauses 130 and 131 stand part.

That schedule 6 be the Sixth schedule to the Bill.

Clause 132 stand part.

That schedule 7 be the Seventh schedule to the Bill.

Clause 133 stand part.

Paul Scully (Conservative, Sutton and Cheam)

The UK’s markets regime is the CMA’s most powerful tool for promoting competition in UK markets. Clauses 129 to 133 reform the markets regime, ensuring that it is effective, focused and proportionate.

Clause 129 reforms the market study process. Currently, the CMA or sector regulator must start a consultation on making a market investigation reference, or decide not to make a reference, within six months of the start of a market study. That timeframe is unduly restrictive. The clause removes the six-month time limit, giving flexibility for the consultation to start at the most appropriate point. It allows extra time to gather evidence, ensuring that information that comes to light later on can be considered.

Clause 130 makes amendments so that references can be targeted appropriately, to better define the scope of the investigation required. It further narrows the questions that the CMA group must consider, reflecting the scope set out in the reference. This will allow the CMA to ensure that its work is targeted effectively, which will benefit businesses and investors.

Clause 131 introduces schedule 6, which expands the use of voluntary undertakings that remedy competition harms. The clause allows the CMA to accept such undertakings at any stage in the market inquiries process. This includes the acceptance of partial undertakings that address some features causing concerns in a market, but not all. The flexibility to take issues “off the table” by accepting such undertakings, alongside the amendments made by clause 132 regarding narrowing the scope of investigations, will help to provide greater flexibility in the regime. We recognise that voluntary undertakings will not be appropriate in every case. Where they are appropriate, they will drive efficiencies and enable faster results. They will also help to tackle competition problems and any resulting consumer harm as quickly as possible.

Clause 132 introduces schedule 7, which gives new powers to the CMA to conduct trials of certain types of remedies at the conclusion of a market investigation where an adverse effect on competition has been identified. That will help to ensure that any final remedy is suitable and effective. For now, the power to trial remedies will be limited to solutions that relate to the provision or publication of information to consumers. That is the area where trials are most likely to be useful and enables a proportionate approach to introducing this new power. The Secretary of State will be able to expand the scope of remedies to trial in future, subject to the draft affirmative procedure.

Clause 133 gives the CMA new powers to amend ineffective remedies where less than 10 years has passed since the original market investigation. Where the CMA decides that remedies have been ineffective and should be varied, it will be required to consult with affected businesses before reaching a final decision on whether to vary a remedy, and to conclude the variation within six months. In cases where the Secretary of State has accepted or imposed remedies, the CMA will provide advice to the Secretary of State. This new power will be constrained by a mandatory two-year cooling-off period, beginning at the end of a remedy review.

Alex Davies-Jones (Labour, Pontypridd)

I will speak briefly to clause 129 before addressing our thoughts on the rest of the group. Labour supports the intentions of the measures in the group, and we have not sought to amend them at this stage.

The removal of the time restriction outlined in clause 129 gives the CMA flexibility and more time to gather evidence to determine when the consultation process should commence. That is something I think we can all get behind and fully support.

Schedule 6 outlines the process by which the CMA will be able to accept voluntary commitments during all stages of a market study and a market investigation. It allows the CMA to accept partial undertakings, to narrow the issues that require further investigation. We see these features as central to a flexible regime that firms want to easily engage with. That must be at the heart of any fully functioning and appropriate regime.

Clause 132 and schedule 7, which are incredibly welcome, provide that the CMA may be required by the Secretary of State to conduct trials of remedies before setting a final remedy package. We recognise that since this is a new regime, the regulator may benefit from such trial remedies, and it is important that the CMA has the legislative teeth and support to do so.

We therefore support the measures in the group. We have not sought to amend them, and we believe that they should stand part of the Bill.

Clause 136 - Civil penalties etc in connection with competition matters

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to discuss the following:

That schedule 8 be the Eighth schedule to the Bill.

That schedule 9 be the Ninth schedule to the Bill.

That schedule 10 be the Tenth schedule to the Bill.

Clause 137 stand part.

That schedule 11 be the Eleventh schedule to the Bill.

Clause 138 stand part.

Government amendments 40 to 44.

That schedule 12 be the Twelfth schedule to the Bill.

Paul Scully (Conservative, Sutton and Cheam)

The final clauses in part 2 concern measures that cut across the Competition and Markets Authority’s competition tools. Clause 136 introduces schedules 8 to 10 to the Bill. The Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 already allow the CMA to impose civil penalties for non-compliance with information requirements. The destruction of documents that have been required to be produced, and the provision of false or misleading information, are criminal offences, but schedule 8 introduces powers for that conduct to be subject to civil penalties. It also reforms existing civil penalties to ensure that the maximum penalties are set at an appropriate level.

Schedule 9 introduces powers enabling civil penalties to be imposed for breaches of competition remedies. Competition remedies are interim measures, commitments and directions under the Competition Act 1998 and interim measures, undertakings or orders under parts 3 and 4 of the Enterprise Act 2002. Schedules 8 and 9 also enable the Secretary of State and Ofcom to impose penalties if they are given false or misleading information in relation to their functions under the relevant regimes. They also give the Secretary of State the power to impose penalties to enforce compliance with remedies accepted or imposed in relation to mergers and markets with public interest considerations. Civil penalties will be applicable unless the party has a reasonable excuse, and that will be assessed case by case.

The maximum penalty for an undertaking or person who owns or controls an enterprise that is not complying with information requirements is 1% of the business’s worldwide turnover. Daily penalties of up to 5% of worldwide daily turnover will also be available in some cases while the non-compliance continues. For breach of remedies, the maximum penalty is set at 5% of worldwide turnover and daily penalties of up to 5% of worldwide daily turnover while the breach continues. The penalties imposed on other persons, who will generally be individuals, are capped at £30,000, or up to £15,000 daily while the breach continues. The CMA is required to produce statements of policy regarding the operation of its penalty powers. In doing so, it must consult the sector regulators and receive approval from the Secretary of State. Schedule 10 amends the legislation that gives the sector regulators their concurrent competition powers, so that they need not unnecessarily duplicate the work that they need to do to prepare statements of policy.

Clause 137 introduces schedule 11, which amends the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 to make express provision regarding the giving of information notices outside the United Kingdom. The schedule enables the CMA to give an information notice to a person who is the subject of a Competition Act 1998 investigation, or a person who is or has been a party to a merger review. The schedule also enables the CMA to give information notices to third parties with a defined UK connection. Compliance will be enforceable through the civil penalty regime. The schedule also amends provisions on methods of serving documents to reflect modern business practices; for example, it allows service of documents via email.

Government amendments 40 to 44 are technical drafting amendments to schedule 12. The schedule, which is introduced by clause 138, applies appropriate parliamentary procedures to new regulation-making powers created by the Bill, and makes other consequential and technical amendments. I commend the amendments to the Committee and hope that the clauses will stand part of the Bill.

Alex Davies-Jones (Labour, Pontypridd)

Labour supports the intention behind the provisions in this grouping. Of course there should be provisions about the attendance of witnesses, as outlined in clause 135. The same can be said about ensuring that the Bill has sufficient legal powers on civil penalties, should the need for them arise in the regime. The provisions in clause 136 and schedules 8 to 10 are adequate, and we support them. The same can be said for clause 137 and schedule 11, which make provisions regarding the service of documents and the extraterrestrial—sorry, extraterritorial; I know we are talking about digital markets, but we have not reached that far yet—application of notices under part 1 of the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002. Of course those laws must work in alignment with the intentions of the Bill. Clause 138, Government amendments 40 to 44 and schedule 12 are all sensible, and part of a rigorous procedure, so we do not oppose them.

Schedule 12 - Orders and regulations under CA 1998 and EA 2002

Clause 139 - Overview

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to discuss the following:

Government amendment 59.

Clauses 140 to 142 stand part.

That schedule 13 be the Thirteenth schedule to the Bill.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 201 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Part 3 of the Bill provides for two regimes for the civil enforcement of consumer protection law: a court-based regime and a direct enforcement regime for the CMA.

Clause 139 provides an overview of part 3. Clause 140 sets out the scope of the court-based and CMA direct enforcement regimes. First, the regimes are limited broadly to the trader’s acts or omissions that amount to commercial practices—that is, interactions between traders and consumers. Secondly, to be subject to enforcement action, a commercial practice must harm the collective interests of consumers. Thirdly, the scope of the laws that can be enforced remains broadly the same as that which can be enforced under current law. Government amendment 59 ensures that the Bill reflects existing law, namely the Consumer Protection from Unfair Trading Regulations 2008.

Clause 141 provides for an infringing practice to be in scope of enforcement if the trader committing it meets at least one of the following conditions: the trader has a place of business in the UK; the trader carries on business in the UK; or where the infringing commercial practice occurs as part of activities directed to consumers in the UK by any means. Those tests mean that the jurisdictional scope of the current court-based enforcement regime for consumer law is replicated.

Clause 142 limits the application of the enforcement regimes to a commercial practice that breaches an enactment, obligation or rule of law listed in schedules 13 or 14 to the Bill.

Clause 201 gives a delegated power to the Secretary of State to amend schedules 13 and 14—that is, to add, remove or vary the enactments and enforcer authorisations listed in those schedules. The continuing effectiveness of both regimes will depend on their ability to adapt to reflect the evolution of consumer protection law over time. As new consumer protection laws are made and old ones repealed, there must be a mechanism to ensure that they fall into or out of the scope of the enforcement regimes. If the enforcement landscape and the remits of individual enforcers change, there must be a facility to reflect those changes in the statutory framework. The power is subject to the affirmative procedure, so hon. Members will have due opportunity to scrutinise any provisions made under it.

Schedule 13 lists the enactments, obligations and rules of law that may be enforced through the court-based regime, which replaces part 8 of the Enterprise Act 2002 for conduct going forward. The schedule also makes clear which enforcers may enforce each enactment.

Schedule 14 sets out which enactments the CMA may enforce through its new direct enforcement powers. Its scope comprises core consumer protection legislation and a limited number of sector-specific regulations where CMA direct enforcement is desirable. That reflects the CMA’s specific remit and competence to tackle market-level issues that adversely affect consumers or affect their ability to make choices.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

It is a pleasure to serve under your chairship, Ms Ali. I thank the Minister for his opening remarks, and it is a pleasure to follow my hon. Friend the Member for Pontypridd in speaking on this important Bill.

Clause 139 provides an overview of the structure of part 3, which sets out the court-based regime for the civil enforcement of consumer protection law to protect the collective interests of consumers. As the Minister said, that allows for two regimes of civil enforcement—a simplified courts-based regime and the CMA’s direct enforcement regime.

The regime provides for consumer law enforcers to apply for, and the courts to make, enforcement orders, interim enforcement orders, online interface orders, to which only the CMA may apply, and interim online interface orders to which, again, only the CMA may apply. An enforcer or the court could decide to accept an undertaking from the enforcement subject instead of issuing an order, a mechanism that there should be the option for and is in line with the participative approach of working in the Bill.

Chapter 3 would also provide for certain enforcers—defined in clause 143, which we will go on to debate—and the court to attach remedies, known as “enhanced consumer measures”, to enforcement orders and undertakings. Importantly, chapter 3 would provide new powers for the courts to impose monetary penalties on enforcement subjects who have infringed the consumer protection laws within scope of part 3.

I wish to signal the Opposition’s broad support for part 3 and the measures it introduces to ensure swifter enforcement of consumer protection law and more effective redress for consumers. That is a sentiment shared by consumer groups. As one example, the written evidence submitted by Consumer Scotland expressed broad support for part 3, noting how it:

“simplifies and bolsters the enforcement of penalties for relevant infringements of consumer protection law under part 8 of the Enterprise Act 2002.”

I hope we will work constructively through the Committee to ensure that the consumer provisions in the Bill are as robust and fair as possible, and that we will not see the watering down of any measures currently drafted.

Clause 140 defines the scope of the enforcement regime set out by part 3. It sets out how a trader has committed an infringement of the part 3 enforcement regime if their act or omission harms the collective interests of consumers, as well as meeting the UK connection conditions set out in clauses 141, and the specified prohibition condition set out in clause 142.

The Opposition support clause 140 as a necessary element in introducing a robust enforcement regime. It is a stronger consumer protection, which acts where a continuation or repetition of an act, such as misleading information or an omission of information, could continue to harm future customers unless remedied. However, I ask the Minister for clarity on one aspect of the provision. As well as setting out the scope of enforcement, the clause in subsection (2) also defines relevant terms such as “trader” and “consumer”. The explanatory note states that in relation to the definition of “consumer”:

“A consumer must be an individual and so excludes body corporates. The individual must be acting wholly or mainly outside of their business.”

While it is welcome that individual consumers are being protected through the enforcement regime, could the Minister clarify where that leaves small businesses or the self-employed? The notes suggest that the individual is still a consumer when acting for dual purposes. It is clear to me, as a shadow Minister for business looking at the needs of small businesses in particular, that plenty of British businesses are negatively impacted by rogue traders supplying them, whether with office equipment or digital services. There is a segment of those businesses that could be caught inside or outside the definition depending on its interpretation.

It would be helpful if the Minister clarified whether the Government plan, for example, for microbusiness customers to be included in the consumer protection regime. Who would decide if it was 60% consumer or 60% business for the purposes of this legislation? It may be a product that is being delivered, and the business may be run from home. I would be grateful for the Minister’s comment and clarification on that point.

Amendment 59 replaces “trader” with “person”. It ensures that the definition of commercial practice for the purposes of part 3 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer. I would welcome some clarification from the Minister. Will the amendment mean that where a consumer or private individual commits what would be an infringement by a trader when selling a product to another consumer—for instance through eBay or Facebook Marketplace—they are liable for enforcement action, as a business would be? This is an important area of protection for consumers, so I would be interested to hear more about how it would work in practice. If I understand the provision correctly, it could significantly expand the enforcement regime beyond just businesses.

Clause 141 sets out how traders meet the UK connection condition, which, as set out in clause 140, forms part of the scope of the enforcement regime. It sets out how a commercial practice meets the UK connection condition if at least one of three conditions are met. Those conditions are that the trader has a place of business in the UK, that the trader carries on business in the UK, meaning that their business operates in the UK, perhaps without an office, or that the trader carries on activities that are in any way directed to consumers in the UK. The conditions are necessarily broad but important for the protection of UK consumers. We support clause 141.

Clause 142 defines the specified prohibition condition, which is the final condition setting out the scope of the enforcement regime in part 3. In short, the clause sets out that a commercial practice meets this condition if it breaches provisions listed in schedule 13 and 14. Schedule 13 sets out the enactments, obligations and rules of law to which the court-based enforcement regime applies. The list is very comprehensive, and we support its contents. In particular, we note that chapters 1 to 4 of part 4 of the Bill are included in the schedule, which is welcome. I would welcome assurances from the Minister that the Government consulted widely among stakeholders regarding the compiling of the enactments of the schedule, so that we can be confident that there are no omissions. In addition, I invite the Minister to correct me if I am wrong in my understanding of how the schedule could be amended. There are other schedules with delegated powers, but I wanted to understand what the process would be here if there was a question of needing to amend the schedule if legislation were updated in the future. I would be grateful for clarification on that.

Similarly to schedule 13, schedule 14 lists the enactments to which the CMA’s direct enforcement regime applies. Like schedule 13, this schedule appears to be comprehensively drawn and is thus supported by the Opposition. I note that it also makes reference to other measures of the Bill that will be going through. On the theme of seeking clarity from the Minister, I would welcome assurances that a wide range of stakeholders and legislation has been consulted and reviewed to ensure that this is a comprehensive schedule. I would also ask what the process is for updating the schedule if required in the future.

Clause 143 lists public designated enforcers who would be able to use the court-based enforcement regime. We are pleased to see that this includes the CMA, trading standards, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom, among others. Certain private designated enforcers would also be able to use the court-based regime, such as the Consumers’ Association. We welcome the clause and the inclusion of a comprehensive list of public designated enforcers, but have the Government consulted with the groups they are planning to include in the clause? Were any groups or bodies that expressed an interest in being designated enforcers omitted from the clause?

Subsection (3) gives the Secretary of State a delegated power to add to or remove a body as a public or private designated enforcer, or to amend its entry. Regulations made under the clause would be subject to the affirmative procedure. However, the power could not be used to remove or vary the enforcement powers of the CMA, trading standards or the Department for the Economy in Northern Ireland. We welcome the protection of those bodies’ powers, but I would like clarification from the Minister on private designated enforcers.

The clause names the Consumers’ Association as a private designated enforcer, but no other group. While I note the criteria in clause 144 for designating a body as a private designated enforcer, it would nevertheless be helpful if the Minister spelled out how a body becomes a private designated enforcer. Would it have to apply? I would also be grateful for clarification of the basis on which the Secretary of State may remove, or seek to remove, a public or private designated enforcer—an issue that I will discuss further.

Clause 144 specifies the criteria that must be satisfied for the Secretary of State to designate a body as a private designated enforcer. This is an important clause. The criteria establish certain minimum standards of governance, transparency and competence that a person must meet to carry out enforcement action, and we welcome the clause. However, I refer the Minister to my question about how the Government expect people to become private enforcers. Would there be an application? Perhaps he would set out the process, and the basis on which he envisages withdrawing designation from an enforcer. Would that be because some conditions are no longer met? Would it be because some sort of complaint is received? It would be helpful to understand how those changes could be made.

Clause 145 identifies the categories of person an application for an enforcement order could be made against, and the types of infringements that they must have committed. An enforcer, as designated by clauses 143 or 144, would be able to apply to the court for an enforcement order or an interim enforcement order if the enforcer considers that they have engaged in, are engaging in or are likely to engage in a commercial practice that constitutes a relevant infringement, or if they are an accessory to such a practice.

We welcome the clause, but I would welcome further clarification on a few issues. First, the legislation states that

“an enforcer may make an application in respect of a relevant infringement”.

Did the Government consider changing “may” to “must”, or are they confident that enforcers will always apply for enforcement in cases where they have identified an infringement? I would welcome hearing the reasoning behind the choice made. Secondly, subsection (4) limits the power to apply for the imposition of a monetary penalty to public designated enforcers. Would the Minister clarify why that power has been withheld from private designated enforcers?

Paul Scully (Conservative, Sutton and Cheam)

Let me try to cover some of those questions. On microbusinesses and small business, this is effectively a standard definition that, yes, does exclude microbusinesses, because it replicates provisions in the Enterprise Act. The obvious question then is, “How do microbusinesses and small businesses get any redress in these examples?” but business protection regulations would cover that, and they are not within the scope of this change. However, any of the changes that the hon. Lady requested would largely come under the affirmative procedure.[Official Report, 10 July 2023, Vol. 736, c. 4MC.]

The hon. Lady also asked whether the Government had consulted widely on these enactments. Although we consulted widely on the Bill when I was a Minister in the Department for Business, Energy and Industrial Strategy, these provisions just restate existing law, so we just wrote that into the Bill, instead of spreading the provisions across statutory instruments. It would therefore not necessarily have been particularly informative to have consulted on them.

The hon. Lady asked about private designated enforcers and how an enforcer might be added to the list. The Secretary of State can by regulations add applicants as private designated enforcers that are able to use the court-based enforcement regime. Again, those regulations would be subject to the affirmative procedure, to ensure appropriate parliamentary scrutiny. Any organisation applying for that status would need to provide evidence to the Secretary of State that it meets the designation criteria in clause 144(1), which would likely include evidence as to its legal status and constitution, a list of directors, examples of where it has protected the collective interests of consumers, and so on.

The Secretary of State will in due course set out more detailed guidance on the evidence and information that applicant organisations should provide when seeking designation. The Government clearly want to guarantee that those designated are able to protect the collective interests of consumers but are prevented from using that privileged position to seek any commercial gain or competitive advantage. They therefore intend that any private designated enforcer that fails to meet the criteria would have its designation altered or withdrawn by the Secretary of State.

Clause 140 - Relevant infringements

Clause 143 - Enforcers

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to discuss clause 144 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Clauses 143 and 144 set out the public and private bodies that have enforcement powers under the court-based enforcement regime, which we have touched on, and restate and update part 8 of the Enterprise Act 2002.

Clause 143 sets out two categories of enforcer: public designated enforcers and private designated enforcers. The clause also gives the Secretary of State powers to add or remove a public designated enforcer or to amend its entry, and to add, remove or vary the entry of a person as private designated enforcer. These powers are subject to criteria set out in clause 144.

Neil Coyle (Labour, Bermondsey and Old Southwark)

Is there a reason why trading standards is not on this list? It would be the go-to for a consumer or business under existing law, so why is it absent from this list?

Paul Scully (Conservative, Sutton and Cheam)

As I say, we are essentially bringing across the existing law, but there is no reason why the Secretary of State cannot look at that in time. In clause 144, we are setting out the detail and criteria that must be met when a person who is not a public body is added by the Secretary of State as a private designated enforcer.

Neil Coyle (Labour, Bermondsey and Old Southwark)

If a consumer believes that they have been sold something that is counterfeit or damaging, which might meet the “detrimental effects” test, where would they go to find out how to address that issue? If a British company has a licence and a trademark, and it sees someone selling fake goods online, thereby undermining the company’s work and trademark in the UK, how does it go about addressing that? In the evidence session, a question was asked about raising awareness of changes to legislation. Could the Minister take a brief moment to explain those two routes to getting change?

Paul Scully (Conservative, Sutton and Cheam)

If I have got this right, that goes back to the hon. Gentleman’s previous example. Let me correct my earlier comments. I talked about the fact that we are bringing existing legislation across into the Bill. The local trading standards enforcement regime comes under weights and measures, which is specified in the Bill. It is an old term for a modern-day service, and it is encapsulated in the regime. Clearly, businesses will go through the traditional routes to get consumer redress, which can include going through the trading standards regime.

Neil Coyle (Labour, Bermondsey and Old Southwark)

When witnesses from trading standards sat here two weeks ago, John Herriman and David MacKenzie told us that there needed to be an awareness-raising campaign about the changes. Has the Minister done that, or is that intended to come after the enactment of the Bill? How will that come about?

Paul Scully (Conservative, Sutton and Cheam)

A lot of that will be done through our relationship with Citizens Advice and trading standards. When I covered this brief a year ago and held the position currently held by the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), we continually did work for consumers, whether that was on this kind of redress, work through the CMA or work through Citizens Advice and trading standards. Clearly, given that we are changing the regime to make things faster and more effective, we will want to shout about it, because people need to be aware of it, and that will be part of a wider awareness scheme. I cannot give the hon. Gentleman chapter and verse on the campaign, because I am not running it.

Neil Coyle (Labour, Bermondsey and Old Southwark)

Perhaps rather than chapter and verse, just one sentence would be fine. Will the Government resource Citizens Advice to provide the new information on a whole new legislative change in consumer rights?

Paul Scully (Conservative, Sutton and Cheam)

As I say, the Government do a lot of work jointly with Citizens Advice to market, campaign on, and raise awareness of these regimes.

Neil Coyle (Labour, Bermondsey and Old Southwark)

Apologies for coming back on this, but that is not an answer. Citizens Advice came to the Work and Pensions Committee just a few weeks ago to say that its advisers, many of whom are volunteers, face the most dire circumstances of their 80-year history; the circumstances are worse than they were during the second world war. That is its assessment of the financial situation that its bureaux face in trying to help people. Is the Minister saying that Citizens Advice will be resourced to provide the additional information?

Paul Scully (Conservative, Sutton and Cheam)

I will not conflate this issue with the matter of the resources for Citizens Advice’s broader work, but we already work with Citizens Advice to raise awareness of its work, and will continue to do that together. On any additional duties, clearly we want to make sure that Citizens Advice is as well resourced as it can be. A lot of its work is essentially similar to what is proposed, but we are trying to make it faster for it to offer remediation. That is the whole purpose of this work. We are simplifying and consolidating the criteria that apply under the current court-based regime. That guarantees that those designated as private enforcers will have the independence, competence and expertise required to protect consumers and their independence.

Clause 145 - Applications

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to discuss the following:

Clauses 146 to 154 stand part.

Clause 169 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Clauses 145 to 154 restate and update provisions in part 8 of the Enterprise Act 2002. They empower consumer enforcers to apply for, and the civil courts to make, court orders to prevent or stop infringing practices.

Clause 145 provides enforcers with the power to apply to court for an enforcement order or an interim enforcement order. An application may be made where a person has engaged in, is engaging in or is likely to engage in an infringing practice, or is an accessory to such a practice. The clause also gives public designated enforcers a new power to apply for the imposition of a monetary penalty for past or continuing infringing practices.

Clause 146 maintains the CMA’s leadership and co-ordination role by empowering it to give directions to other enforcers regarding who can make an application to court.

To ensure applications to court are made only when necessary, clause 147 requires enforcers to engage in appropriate consultation with the suspected infringing party or accessory before making an application for an enforcement order or interim enforcement order.

Clause 148 empowers the court, in response to an application under clause 145, to make an enforcement order against a person it finds has engaged, is engaging or is likely to engage in an infringing practice or is an accessory to such. As an alternative to making an order, the court may accept an undertaking from the infringer or accessory. Orders or undertakings must direct the subject to achieve compliance with the law.

Clause 149 gives the court a discretionary power to include enhanced consumer measures that it considers to be just, reasonable and proportionate in an enforcement order or an undertaking. Enhanced consumer measures, which are defined in clause 213, are steps an infringer or accessory may be required to take to provide redress to affected consumers, ensure compliance with the law, or offer consumers more effective choice. They are vital to ensuring that consumers are compensated and that infringements are remedied.

Clause 150 gives the court a new power to impose a monetary penalty of up to £300,000 or 10% of the recipient’s global turnover—whichever is higher—for past or continuing infringing practices. This provision is at the heart of the Bill’s reforms to consumer protection. It is imperative that there are consequences for breaking UK consumer law to signal that illegal practices will not be tolerated. Recognising that these penalties may be significant, the clause gives the recipient the right to appeal the decision to impose the penalty, its nature or the amount on the merits, in addition to their existing appeal rights.

Clause 151 empowers the court to make an interim enforcement order or accept an undertaking against a suspected infringer or accessory. To exercise the power, the court must consider it expedient that the infringing practice is prohibited or prevented immediately, and a final order must be likely to be granted.

Clause 152 gives the CMA the power to apply to court for an online interface order, or an interim online interface order. It can do that where it considers a person has engaged in, is engaging in, or is likely to engage in, an infringing practice. The reach of online traders and the complexity of the online marketplace has increased. That makes it more critical than ever that the CMA has the power to apply to the court to address infringing content online.

Clause 153 provides for courts to make online interface orders to require changes to online content and interfaces. This could include content removal, displaying warnings, restricting access or deleting a domain name. These powers are available only when the order is necessary to avoid the risk of serious harm to the collective interests of consumers and when there are no other available means within this chapter that would be wholly effective in stopping the infringement.

Clause 154 empowers the court to make interim online interface orders where it is expedient that the infringing practice is stopped or prohibited immediately and a final online interface order would be likely to be granted.

Clause 169 sets out two conditions that must be met before enhanced consumer measures can be included: in an undertaking given to a private designated enforcer, or in an undertaking given to the court or an order made by the court following an application by a private designated enforcer. The clause provides the framework to ensure that where enhanced consumer measures are used by private designated enforcers, it is done appropriately and with the end goal of solely benefiting consumers.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

I have already made some remarks on clause 145, but I will just echo my final question. I asked the Minister about the power for public designated enforcers to apply for the imposition of a monetary penalty and why that power has been withheld from private designated enforcers. Clause 146 refers to CMA directions to other enforcers. As the Minister has outlined, the clause introduces provisions such that if an enforcer other than the CMA seeks similar action on applying for an enforcement order for a particular infringement, it may direct which enforcer can make the application. That could lead to, for example, the CMA directing that an application for an order can be made only by itself.

We support the clause, but does the Minister’s Department expect the CMA to engage constructively with other enforcers to ensure that the most suitable enforcer is the one that is allowed to make the application? The underlying policy argument is important; we would not want to see multiple enforcers seeking to take action against the same business for the same infringement. I would like some clarity on how that is expected to work.

Clause 147 would provide that where an enforcer thinks a relevant infringement has occurred or is likely to occur, it must consult the enforcement subject before making an application for an enforcement. Subsection (2) introduces a requirement on the enforcer to alert the enforcement subject to the possibility of a monetary penalty being sought alongside an enforcement order. The explanatory notes state that the policy intent is that prior consultation may quickly lead to the relevant infringement ending and make court action unnecessary. We welcome the clause as a necessary part of the enforcement process, and in the spirit of opportunity for co-operation that underpins the new regime.

Under clause 148, the court would be able to make an enforcement order if, on an application from an enforcer under clause 145, it finds that the enforcement subject has engaged, is engaging or is likely to engage in a commercial practice that constitutes a relevant infringement or is an accessory to the infringing practice. As an alternative to an order, the court would be able to accept an undertaking. Under subsection (3), in determining whether to make an enforcement order the court would have to take into consideration whether the enforcement subject had given an undertaking under clause 155 to a public designated enforcer, or clause 177 in respect of the infringing practice. Where the court makes an enforcement order, it would be required under this clause to indicate the nature of the infringing practice and direct the enforcement subject to comply. We strongly welcome the clause. It is a necessary step in ensuring that the courts have adequate enforcement powers over companies that are causing detriment to consumers.

I have a question for the Minister regarding clause 148(8). It states that as part of an enforcement order, an undertaking may include a further undertaking by the respondent to publish “the order” and “a corrective statement”. As the explanatory notes state, the policy intent behind the subsection is to prevent the company

“further distorting consumers’ purchasing decisions”

by making them aware that a company has had to change its practices. I welcome the subsection as a common-sense step to ensure full clarity for consumers in instances in which enforcement action has been taken, but will the Minister clarify whether he expects the court always to require the publication of the order and a corrective statement? Surely, it would be simpler and better for the consumer for that undertaking to be included in every enforcement order, so that there was confidence that the consumer will be as informed as possible.

Clause 149 will enable the court to include, in an enforcement order or interim order, a requirement to take, as part of enforcement orders,

“such enhanced consumer measures as the court considers just and reasonable.”

The court would first have to consider whether the proposed measures were proportionate and in doing so consider

“the likely benefit of the measures to consumers…the costs likely to be incurred by”

the enforcement agent and

“the likely cost to consumers of obtaining the benefit of the measures.”

We welcome the clause as a further necessary element of the consumer protection and enforcement regime that we are seeking to deliver.

Clause 150 confers a new power on courts to impose a monetary penalty on a company for infringing consumer protection regulations. The Opposition welcome the clause, but why has it taken so long to get to this point? Turning to the details of the monetary penalties, subsection (5) sets out that, where the enforcement subject has a turnover that can be determined, a fixed amount penalty must not exceed £300,000 or, if higher, 10% of the total value of the enforcement subject’s turnover. We support those penalty thresholds, but could the Minister expand on why the legislation has landed on £300,000 as a maximum penalty if it is less than 10% of the company’s turnover? Is that an arbitrary figure or one that has been consulted on and calculated to ensure the maximum deterrent so that companies do not infringe the legislation? Will the Minister clarify the source of the figure?

Finally, I would welcome further clarification from the Minister on clause 150(8), which provides an enforcement subject who is required to pay a monetary penalty with a right to appeal the decision to impose a penalty, its nature or amount on the merits, in addition to their existing appeal rights. I would be grateful if the Minister could clarify the appeals threshold, which appears to be different from the judicial review threshold for companies with strategic market status, as set out earlier in the Bill. Was the threshold set for an informed reason? There seems to be a lower threshold for consumer protection infringements.

In addition, has the Minister considered whether the more merits-based approach could lead to companies, particularly larger ones with significant legal capacity, drawing out the process of monetary penalties being imposed on them by pursuing lengthy court appeals? I want to ensure that we have understood the matter correctly, so I would welcome the Minister’s clarifying the point and saying whether those are unfounded concerns. If they are well founded, we want to have a look at the issue more closely. In short, the Opposition welcome the clause, because we want to ensure that the measure is a robust as possible in deterring companies from engaging in practices that harm consumers.

Under clause 151, the court will be able to make an interim enforcement order on an enforcement subject. It will be able to make such an order if it considers that the subject

“has engaged…or is likely to engage in a commercial practice which constitutes a relevant infringement”.

In addition, interim orders can be made if

“it appears to the court that if the application had been an application for an enforcement order it would be likely to be granted, and…the court considers it is expedient that the infringing practice is prohibited or prevented immediately.”

That includes being able to make an interim enforcement order without notice.

We welcome the clause in principle, as a positive contribution to ensuring that swift action is taken where necessary to protect consumers. However, it would be helpful if the Minister could clarify the scope or give examples of how the power may be used. Examples specified in the Bill papers include preventing a misleading advert from being made public and enforcing the withdrawal of unsafe goods, but it would be helpful to understand the threshold for an order to be made without notice. Is it, for example, where there is current or imminent harm? It is important that that is clarified so that consumers and those who would be enforcement subjects can understand how the power could be used by the court, and so that there is no question about scope.

Clause 152 enables the CMA to apply to the court for an online interface order or interim online interface order in respect of a person that it considers has engaged, is engaging or is likely to engage in a practice that constitutes a relevant infringement. Subsection (3) sets out a jurisdictional test that limits the CMA’s power to apply for an order in respect of a third party overseas; it may do so only if the person is a UK national, the person is habitually resident in the UK, the firm is established in the UK, or the firm carries on business in the UK.

Is the Minister confident that those criteria cover all scenarios in which companies could be involved in misleading practices towards UK consumers, whether they are resident here or not? Why is it just the CMA that has the power to make such applications, and not other public or private enforcers, such as trading standards or local weights and measures authorities? We welcome clause 152, but it would be helpful to understand that further. There has been some discussion of the important role of local trading standards in our enforcement regimes.

Clause 153, which necessarily follows clause 152, gives the court a discretionary power to make an online interface order in response to an application from the CMA under clause 152. We welcome clause 153 and recognise the importance of including digital practices that harm consumers. However, as with clause 152, will the Minister expand on why local weights and measures authorities will not be given powers to apply for orders alongside the CMA?

The Bill represents an opportunity to update the powers of trading standards so that they can operate more effectively in the 21st century. The Chartered Trading Standards Institute notes that officers regularly have to exercise powers of physical entry in order to seize documents that they may wish to use in criminal proceedings, but it also raises the issues that officers have accessing filed documents that are not physical. My question is about how trading standards powers should be reviewed and updated in line with those of other enforcers, and the opportunity to do that in the context of the Bill.

Finally, under clause 154, following an application from the CMA, the court will be able to grant an interim online interface order, where it is considered that a final online interface order would likely be granted but that an interim order is needed to end an infringement immediately. Subsection (2) will permit the court to grant an interim order without giving notice to the enforcement target.

We welcome the provisions, but I have similar questions —they are relevant—to those I asked about the earlier clauses.

Paul Scully (Conservative, Sutton and Cheam)

Let me try to cover as many of those questions as I can. The hon. Lady asked about the possibility of multiple enforcers in process at the same time. In effect, we are restating the existing arrangements, which have been working. They work with the CMA as the gatekeeper, so the CMA would have to be notified when action has been taken—it can filter anything going on in that regard—and it would have to co-ordinate the approach.[Official Report, 10 July 2023, Vol. 736, c. 4MC.]

On clause 148, and court powers to make orders and penalties, the hon. Lady talked about subsection (9) on whether an undertaking may include a trader publishing it in a corrective statement and whether I, as a Minister, would always expect that to happen. It is discretionary. The enforcer may require that as appropriate.

On the penalties, the £300,000 basically sits in the middle of the pack internationally. If we look at the regimes around the world, where penalties are imposed on individuals, New Zealand’s consumer protection system has £100,000 and Canada’s consumer regime has £450,000. We sit within that, looking at the international comparators.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

Is the Minister saying that the decision to go with the £300,000 was just because it was in the middle of the pack?

Paul Scully (Conservative, Sutton and Cheam)

It was a fair balance after looking at international regimes—a fair comparison with similar regimes around the world. Similarly, the 10% penalty is reflected in penalties across other regimes.

Clause 155 - Acceptance of undertakings by enforcers

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to debate clauses 156 to 160 stand part of the Bill.

Paul Scully (Conservative, Sutton and Cheam)

Clauses 155 to 160 restate and enhance provisions in part 8 of the Enterprise Act 2002 that govern the acceptance and enforcement of undertakings by enforcers and the courts.

Clause 155 provides a power for enforcers to accept, vary and release an undertaking from an infringer or accessory. Undertakings may be accepted only where they include provisions that will stop or prevent the allegedly infringing practices. The clause will allow enforcers to continue using co-operative enforcement means, which can lead to faster resolution of consumer harms and reduce the volume of applications for court orders.

Clause 156 enables enforcers to include enhanced consumer measures in undertakings accepted under clause 155. Enforcers must consider those measures to be just, reasonable and proportionate. Clause 157 sets out requirements for enforcers when varying or releasing undertakings that ensure procedural fairness for enforcement subjects. Clause 158 allows for further court proceedings for breaches of undertakings and orders made by the court, giving the court a new power to impose a civil monetary penalty for the breach of an undertaking given to the court.

Clause 159 allows a public designated enforcer to make an application to the court for a consumer protection order if it considers that an undertaking given to it has been breached. If the court is satisfied that that is the case, it may make the requested order, impose a monetary penalty or both. A penalty may be imposed only in cases where the breach was without reasonable excuse.

Clause 160 sets out the types of penalties and the maximum penalty amounts that can be imposed by the court for failure to comply with undertakings given to it or to public designated enforcers. The court has the discretion to impose a fixed amount penalty of up to £150,000 or 5% of global turnover, or a daily rate penalty of up to £15,000 or 5% of global turnover accruing over the days when non-compliance continues, or a combination of both.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

Clause 155 provides that where an enforcer could make an application to the court for an enforcement order or an interim enforcement order, it may accept an undertaking from the enforcement subject. Subsection (2) sets out the scope of such an undertaking, which is the infringer or the accessory agreeing not to continue or repeat the infringing practice. The Opposition strongly support the clause as it provides necessary flexibility in the consumer protection regime.

We heard during evidence, particularly from the CMA, that the ability for companies to work co-operatively with enforcers to comply with the new regime is an important part of having the fairest and best possible enforcement regime. Where possible, we should ensure that enforcement is done through co-operation. In evidence to the Committee, the CMA said:

“This is not a regime where we want to operate behind closed doors. The whole design of the regime is a participative approach where we will engage with a broad range of stakeholders, businesses and consumers as we consult on designation, design the conduct requirements, and then enforce against them.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 6, Q2.]

As a result, we welcome the clause.

Clause 156 enables an enforcer to include enhanced consumer measures as part of an undertaking from a company, if the enforcer considers them just and reasonable. The enforcer will be obliged to consider the likely benefits and costs of the measures as part of its assessment of their proportionality. In particular, it will consider the costs of the measures themselves to the enforcement subject, as well as the administrative costs. As with clause 149, we welcome clause 156 as a further necessary element of the new consumer protection regime.

Clause 157 sets out the process to be followed when an enforcer proposes to materially vary or release an undertaking that it has previously accepted. Specifically, the process requires the enforcer to give notice to the respondent of its intention to vary or release an undertaking, and to consider any representations made in accordance with the notice. The notice must include the time by which representations may be made to the enforcer. We welcome this clause, which provides clarity for the enforcement regime, the enforcement subject and the consumer in the event of a necessary change. What timescale does the Minister expect the process to work to in most cases, or will it be entirely up to the enforcer? It would help both Parliament and the enforcement bodies to understand the timings envisaged in this process, to be sure that they strike the right balance between being flexible and proportionate and are fair to both the enforcement subject and consumers.

Clause 158 would apply in circumstances where the court makes a consumer protection order against an enforcement subject or a member of its corporate group, or where it has accepted an undertaking. In the event of a failure to comply with the order or undertaking, the clause enables the enforcer that made the original application or any other enforcer to make a further application to the same court. In effect, the court will be able to act in respect of not only non-compliance with an undertaking, but the infringing practice and any related consent or connivance with it by an accessory. The court will be empowered to impose a monetary penalty, regardless of whether the enforcement subject has a reasonable excuse for non-compliance, reflecting the serious nature of breaching an undertaking given to the court. We welcome the clause as a way of providing robust enforcement and punishment mechanisms for failure to comply with the regime, but I would welcome clarification from the Minister on subsection (8). Like clause 150, that subsection provides an enforcement subject who is required to pay a monetary penalty the right to appeal the decision to impose a penalty, its nature or amount on the merits, in relation to their existing appeal rights. I am not sure I completely grasped his previous argument on whether there is a lower appeals standard for those elements of the Bill?

Clause 159, similar to clause 158, sets out the process for when a company fails to comply with an undertaking accepted by the enforcer or the courts. The powers granted to the courts and the process by which the enforcer must apply reflect the provisions in clause 158 and, in the same way, we welcome them. However, the same question is raised about what looks like a lower threshold for appeals than in other parts of the Bill.

Finally, clause 160 sets out further details around the monetary penalties the courts may impose for failures to comply under clauses 158 and 159. We welcome any steps to improve enforcement action through the imposition of monetary penalties and therefore support the clause in principle. Despite that welcome, I must ask the Minister why, when it comes to failure to comply with undertakings, the monetary penalty in the clause, which is £150,000, is less than that in clause 150, where the court can issue penalties of up to £300,000? Similarly, clause 160 refers to 5% of the company’s turnover versus 10% in clause 150. I may not understand some of the Government’s rationale behind those different amounts. What are the reasons for the differences in the thresholds and those lower amounts?

Paul Scully (Conservative, Sutton and Cheam)

I picked up three questions. The reason the hon. Lady could not follow my argument about appeals from the first bit was because that was the bit I forgot to answer. I will cover that because they relate to the same thing.

Timescales will be up to the enforcer. None is set, but there is a general duty of expedition on the CMA set by the Bill overall. On appeals as they relate to both sections—

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

Is the timescale deliberate, or has the question simply not been fully addressed? It is important to ensure clear expectations of the timing of some of these processes.

Paul Scully (Conservative, Sutton and Cheam)

I think the reason is the wide range of remediation events that may come before the enforcer to tackle, so they are being given that flexibility, but with an understanding that there is a general rule of expedition on the CMA. That is why we have approached this as we have.

The appeals regime is very different from the bits of the digital markets regime that we talked about earlier. In that case we were talking about a small number of firms with strategic market status, whereas any trader can be subject to this regime. The new monetary penalties that we are introducing are significant. A merits-based appeal is therefore important, because of the range of different-sized companies involved, to ensure fairness and bacause the issues involved relate to settled law rather than novel regulations covering digital conduct. Appeals are less likely to be disproportionately lengthy, because the digital market involves a more novel approach, which is why we were worried about extended appeal processes.

As for why thresholds are lower in this part of the Bill than for infringements, infringements, at £300,000, are clearly more serious. What we are talking about here—a breach of undertaking to a court—is still serious, but if someone is stepping down, we believe it is more proportionate to set the threshold at the slightly lower amount of £150,000.

Clause 161 - Notification requirements: applications

Rushanara Ali (Labour, Bethnal Green and Bow)

With this it will be convenient to consider clauses 162 to 164 stand part.

Paul Scully (Conservative, Sutton and Cheam)

Clauses 161 to 164 restate and update provisions in part 8 of the Enterprise Act 2002 that enable the CMA to perform co-ordination functions across the consumer enforcement landscape. This will help to prevent duplication of enforcement, which imposes an unnecessary burden on traders and wastes public money.

Clause 161 requires enforcers to notify the CMA of their intention to apply for certain court orders. Clause 162 imposes a requirement on enforcers to inform the CMA of any undertakings given to them. Clause 163 imposes a requirement on trading standards departments in England and Wales to notify the CMA if they intend to start proceedings for an offence under an enactment listed in part 1 of schedule 13 to the Bill. Clause 164 empowers UK courts to notify the CMA of relevant convictions and judgments. Bringing convictions and judgments to the attention of the CMA that it might not otherwise be aware of will allow the CMA to consider exercising its enforcement power under this part of the Bill.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

It is a pleasure to speak to clause 161 and the other clauses in this group. Under clause 161, as the Minister outlined, enforcers would be able to notify the CMA before applying for an enforcement order, and could only apply for an order 14 days later, or seven days later when applying for an interim order. The powers also allow the CMA to agree to shorten these wait times. The Bill’s explanatory notes explain:

“The policy intent underlying the notification requirement in this clause is for the CMA to be able to perform a coordinating role in relation to enforcement under this Part. The notification requirement will enable the CMA to facilitate the sharing of information between enforcers”,

and that is outlined as mitigating

“the risk of traders facing multiple actions in relation to the same infringing practice”

—a point that we have raised before. We are supportive of the clause and the principle of enabling the enforcement regime and ensuring that it is joined up and efficient in practice. I seek the Minister’s clarification on whether the Government have had discussions with other public enforcers on the provisions in the clause. Is it the case, as he has said before, that the CMA broadly has a co-ordinating role and other powers, and is that carrying on an existing practice and pattern of engagement between those enforcing bodies?

Clause 162 requires enforcers to notify the CMA of the terms of any undertaking given to it under clause 155 and of the identity of the persons giving it. Again, that is important to enable the CMA to fulfil its co-ordination role. As with clause 161, we support the provisions in the clause. Clause 163 introduces provisions requiring local weights and measures authorities, such as local trading standards bodies, to give the CMA notice of its intention to start proceedings for an offence under schedule 13, which we have debated. The authority must also notify the CMA of the outcome of those proceedings.

The policy intent, as explained by the explanatory notes, is to enable the CMA to play its co-ordinated role granted to it in previous clauses. The notes provide a potential example whereby the CMA could inform one authority that another is prosecuting, or that an enforcement order has been granted in respect of the same infringing practice. That is an important part of the co-ordinating role because it demonstrates that it is not just about the CMA being informed, but the CMA ensuring that other relevant enforcers are informed of what other enforcers are doing. That is then a streamlined and efficient process that does not hit the enforcement subject more than once on the same matter.

Clause 164 confers a power on the courts to notify the CMA of convictions and judgments it makes that may not have been bought to its attention. That is a common-sense provision. However, I would welcome further clarification from the Minister specifically on subsection (2). It states that the court

“may make arrangements to bring the… judgment to the attention of the CMA”.

We know the strain and pressures that our court system is under. I ask the Minister why the provision introduces a power as opposed to a duty. If the CMA is to have, as is intended, a co-ordinating role where it is in the picture on all the relevant information related to those enforcement subjects, are there any circumstances in which the Government believe the courts may not need to inform the CMA? In that case, could the Government clarify what those circumstances might be, or where they might consider it not necessary for the CMA to have this information if it considers it to not be relevant to the function it carries out?

We need to remember that this is not just a function being carried out for today; this is where the CMA will be able to have a record of enforcement measures, any breaches and any other information that would be relevant to any considerations in the future. I would be grateful to understand from the Minister why that important and common-sense provision is a power as opposed to a duty.

Paul Scully (Conservative, Sutton and Cheam)

The CMA being able to issue permission to bring enforcement procedures is consistent with the position under part 8 of the Enterprise Act 2002. We respect and understand the expertise of all enforcers, including sector regulators, so the CMA is playing a co-ordination role to effectively share information between enforcers, and guarantee that enforcement actions are not duplicated. That will mitigate the risk of a trader facing multiple actions for the same infringement practices. The Government have discussed the provisions with other enforcers, and the CMA already has memorandums of understanding with other enforcers.

On the question of why there is a new reporting requirement in clause 164, actually it is not new. It was already established under part 8 of the Enterprise Act. Again, it ensures that the CMA can consider exercising its enforcement powers where appropriate. It only gives the court the power to notify judgments and convictions to the CMA. It is already there under the Enterprise Act, and that is why we have brought it in here.

Seema Malhotra (Labour/Co-operative, Feltham and Heston)

Perhaps I could put the point about power versus duty to the Minister again? I understand that many aspects of the Bill have been brought together from other areas of legislation. We have to ask the question within the context of the new regime, which is different to how the situation was prior to the legislation coming in, whether that is worth reviewing. We are talking about a regime in which the CMA is now a co-ordinating body, in which there may be different ways action can be taken and where information from the court could be material. There is not as much of a duty to pass that information on under clause 164, but that could be relevant information that is not there for a matter in the future.

I again draw the Minister’s attention to the massive backlog we have in the courts, and the administrative challenges with some of those procedures. The best intentions may not be a reality, and that may then have consequences for the regime we are trying to set up to be as robust, predictable and efficient as possible.

Paul Scully (Conservative, Sutton and Cheam)

I take the hon. Lady’s point, but I would say that it has been directly transposed. It is a power not a duty in the Enterprise Act, and that is where we have worked from.

Neil Coyle (Labour, Bermondsey and Old Southwark)

There is an alternative. There was a suggestion from trading standards representatives of a take-down power, which would bypass the longer route that adds an administrative burden and places the onus on businesses and individuals. Can the Minister explain or furnish us in writing as to the rationale for not seeking the take-down power and a more immediate means of addressing a problem?

Paul Scully (Conservative, Sutton and Cheam)

I or the relevant Minister will certainly write to the hon. Gentleman on that basis.

Written evidence to be reported to the House