On Monday 11th March 2024, the Digital Markets, Competition and Consumers (“DMCC”) Bill reached its Report Stage in the House of Lords. It marked a significant win for competition, decentralisation and plurality in Digital Markets, withstanding intense lobbying from Big Tech – with an astounding number of amendments passed to protect smaller, independent businesses. In this blog, we highlight the key wins from the Report Stage:
Interoperability
Amendment 60, as tabled by Lord Fox, covered the Bill’s lack of guidance on interoperability and international standards. Crucially, it sought to ensure that the DMU understands its role in seeking to ensure that international standards bodies are promoting interoperability, both vertically and horizontally. The Bill does not explicitly include interoperability between an app and a platform that operates as a distributor and, in a network sense, among websites that compete with each other and with platforms.
Although the amendment was not moved to a formal vote, the government’s response and its affirmation of the importance of interoperability was reassuring. For instance, Viscount Camrose recognised that a lack of interoperability in digital markets can reinforce entrenched market positions and harm competition. As such, the Bill gives the DMU flexible powers to “apply to both interoperability between platforms and between and among apps and platforms and other digital services”. The government’s broad interpretation therefore indicates that the DMU will be equipped to use conduct requirements prescribed in the Bill to promote interoperability, and the government can be held to its interpretation following the Supreme Court’s landmark decision in ‘Unison’[1].
Time Limit on Secretary of State Approval
One area of the Bill that garnered significant attention was Clause 114, which originally provided that, before publishing guidance on how it will exercise its functions, the CMA must obtain the approval of the Secretary of State. Importantly, without a prescribed time limit within which approval must be granted, the Secretary of State can choose not to approve it – and can take as long as it wants to make this decision. In light of vociferous lobbying by Big Tech, this presents a risk that the Secretary of State be minded to delay a decision for as long as possible for the benefit of the dominant platforms.
To mitigate this unfettered power, Amendment 56 (tabled by Lord Lansley) installs a 40-day time limit for the Secretary of State to approve the guidance or refer it back to the CMA with a statement of reasons why is should not be published in that form. The effective promotion of competition in Digital Markets relies on speedy enforcement by the regulator: a strict timeframe prevents undue delay by the Secretary of State, thus ensuring the CMA has the power to intervene at the earliest opportunity. This amendment was subsequently agreed with a majority of 202 votes in favour.
Narrowing the S29 Countervailing Benefits Exemption
Section 29(a) of the DMCC Bill, gives the CMA the power to close a conduct investigation into an undertaking where the “countervailing benefits exemption applies”. As such, tech monopolists would be able to argue that their products and services provide a consumer benefit and, as such, should excuse their abuse of dominance in other markets.
By reverting the clause to its original wording, as introduced in the House of Commons, Amendment 23 narrows the ability of bigger platforms to claim their anti-competitive behaviour presents countervailing benefits. The reintroduction of the requirement for conduct to be “indispensable” to the realisation of benefits (before an exemption can apply) also strengthens the regulator’s ability to rebuff false or tenuous claims.
“Proportionality”
During the debate, Lord Faulks reiterated the problem with using proportionality as a factor in considering whether the CMA may impose conduct requirements on a designated undertaking. Namely, “proportionality” carries a heavy legal charge, and its analysis would spill over from cases involving the Human Rights Act or A1P1 (Article 1 – First Protocol of ECHR) into all cases – thus increasing the scope for Big Tech platforms to challenge an intervention.
Amendment 13 was subsequently moved to reinstate the wording of the original Bill: replacing ‘proportionate’ with ‘appropriate’. As elaborated by Lord Faulks, the change in the wording followed a heroic amount of lobbying by Big Tech to make it easier to prolong, appeal and obfuscate, and to frustrate the whole purpose of the Digital Markets Unit. As such, a return to a test of appropriateness gets rid of the risk of opening the floodgates to Human Rights related litigation by dominant platforms.
Reinstatement of Judicial Review
The original Bill, as introduced in the House of Commons, instated judicial review principles as the means by which appeals against penalty decisions are heard. However, as a result of intense lobbying efforts, the Bill was changed so that any party subject to a penalty is to appeal it on a Full Merits basis. In this way, corporate lawyers acting on behalf of dominant undertakings subject to penalties would be able to run rings around the CMA – delaying decisions and enforcement, whilst allowing those platforms to concurrently profit from unmitigated abuses of dominance.
Yet, we witnessed a major victory for competition and plurality in Digital Markets in the Lords, where a majority voted in favour of Amendment 43 – to reinstate judicial review principles. Appeals through judicial review will deliver swifter and more effective outcomes, which is key to closing the enforcement gap and protecting against regulatory inefficacy.
Opening the Door for Private Actions
A strong submission was made by Lord Etherton that the rights in the Bill are enforceable by private actions. The Bill concerns platforms and their abuse – affecting a huge number of people. In the circumstances, granting the right for an individual to take action but then expressly preventing class actions is nonsensical. Although Amendment 49 (on class actions) was not formally moved, the Government committed to reviewing the position as it reviews the extension of the class actions regime and overrules the Supreme Court in PACCAR.
Other Amendments
A number of government amendments were passed, including removing the secretary of state having the power to remove a finding of SMS status, and increasing transparency.
Clarifications were also made that the Final Offer Arbitration mechanism in the Bill, which can be used at any time and are not impeded by a rigmarole of procedural steps.
[1] R (on the application of UNISON) (Appellant) v Lord Chancellor (Respondent) (supremecourt.uk)
Header image courtesy of Manuele Sangalli on Unsplash (licensed for free via Unsplash Licence).