Digital Markets, Competition and Consumers Bill

Written evidence submitted by the BT Group to Public Bill Committee call for evidence on Digital Markets, Competition and Consumers Bill (DMCCB50)

About BT Group

BT Group is the UK’s leading provider of fixed and mobile telecommunications and related secure digital products, solutions and services. We also provide managed telecommunications, security and network and IT infrastructure services to customers across 180 countries. BT Group consists of three customer-facing units: Consumer serves individuals and families in the UK; Business covers companies and public services in the UK and internationally; and Openreach is an independently governed, wholly owned subsidiary wholesaling fixed access infrastructure services to its customers - over 650 communication providers across the UK.

Executive summary

We support the government’s commitment via the Digital Markets, Competition and Consumers Bill to create a new pro-competition regime for digital markets that helps increase choice for consumers and businesses and drives innovation and growth.

We are supportive of the approach and measures for Digital Markets (Part 1). This builds on the

important work on the Competition and Markets Authority (CMA) which in its recent market studies has found evidence of systemic and entrenched market power concentrated in a small number of large companies in areas such as mobile ecosystems and digital advertising.

We do have a number of concerns with respect to proposed changes to the UK competition law

regime (Part 2) notably permitting exemplary damages for competition proceedings, the standard of

review applicable to interim decisions, and the expansion of CMA’s merger control jurisdiction.

We also have a number of concerns with respect to measures to tackle subscription traps (Part 4) that could be disproportionately prescriptive. In particular we are concerned about: an unnecessarily high volume of customer communications; new requirements for mandatory cooling-off periods, the regulatory burden being created where other regulated products are sold or bundled together; and a one-size-fits-all approach to termination procedures. We believe there are more effective and

appropriate ways to tackle unwanted subscriptions, by focusing on the principles required and the outcomes being sought, that would also create fewer constraints on innovation and competition.

The communications sector in which BT Group operates is highly competitive, underpinned by

robust network and consumer-focussed regulatory and legislative frameworks. This has driven

excellent consumer outcomes, with very high uptake of connectivity services [1] while also – so far – supporting commercially funded investment in next generation network upgrades. Consumers and businesses would benefit from a similar regime in digital markets, and well structured regulation in

consumer markets that do not have the benefit of an expert sector regulator such as Ofcom.

The success of the Bill will be dependent on continued and robust support from Parliament and to the CMA as it builds out the frameworks and detailed guidelines and procedures for the

implementation of the regime, as well as timely implementation given the fast pace of change and growth in these markets.

Digital Markets (Part 1)

1.0 As a major telecoms provider that interacts with global technology firms along multiple

dimensions (as a supplier, customer, or in partnership) we welcome the Bill’s ex-ante

regulatory regime that will apply to firms with ‘strategic market status’ (SMS). Digital

markets exhibit strong network effects, derived from economies of scale that are often global, and multi-sided markets where each side of the market benefits from growth on the other sides. Strong network effects in such markets increase the chance of the market

tipping in favour of one or few players.

1.1 Under existing competition law, the CMA has looked at different cases related to digital

platforms and found evidence of limited competition where some platforms have the ability and incentive to undermine competition in different ways, including by:

· self-preferencing (their own services vis-à-vis those of other platforms),

· limiting access to or control over data (e.g. about buyers), or

· establishing closed eco-systems (where competitors can’t effectively enter the

market or gain market share).

1.2 As an example, the CMA’s market study on Mobile Ecosystems found evidence supporting the conclusion that Apple and Google have an effective duopoly that allows them to exert control over elements of the mobile ecosystem. If left unaddressed this could distort

competition and harm consumer choice and innovation.

1.3 The Bill in its current state appears to set a relatively high bar for a digital platform to be

designated as having Significant Market Status (SMS). This means that only a few, large

digital platforms are likely to be subject to the regime. The appeals regime

being created is, correctly, consistent with that applicable in other regulated sectors.

1.4 By focussing on the largest companies, the regime is aiming to address the most potent forms of harm, whilst allowing innovation and not discouraging new entry or creating

regulation in areas where there is more limited risk of harm.

1.5 Further, the Bill allows SMS-designated platforms to demonstrate that behaviours found by the CMA to have a negative impact on competition are justified if they deliver greater

offsetting benefits to users or potential users of the digital activity. This should help secure the appropriate balance between consumer benefit and competition harms. There is a risk that the benefits test is misused, however, so we would encourage the CMA to include

robust guardrails around its use.

1.6 A strength of the Bill as it stands is its aim to address both behaviours that can have an

adverse impact on competition (via Conduct Requirements) and the sources of the adverse

impact on competition (via Pro-Competition Interventions). We also consider it a strength that the Bill in its current state allows the CMA to tailor any interventions to the specific characteristics of each firm acting in a particular digital activity (rather than applying a single set of interventions across the board to all platforms acting in a particular digital activity). This seems to allow more targeted intervention and apply a proportionate approach,

although it gives the CMA a greater degree of discretion than its counterparts in other

jurisdictions (such as the European Commission under the Digital Markets Act).

Competition (Part 2)

2.0 We have concerns with the following proposed changes to the UK competition law

regime (Part 2) (more detail is below):

· Exemplary damages in private damages claims.

· Changes to the standard of review for interim measures decisions.

· Introduction of a new "acquirer focussed" jurisdictional threshold for merger

control.

· Access to documents.

· Remedies packages in market studies and market investigations

2.1 Exemplary damages in private damages claims (Clause 122): The Bill removes the

prohibition on awards of exemplary damages in competition proceedings (i.e. punitive

damages in excess of the amount required to compensate claimants for their losses). This represents a significant change in UK competition policy (not included in the scope of the government’s consultation) and merits proper consultation. The existing regime already acts as a sufficient deterrent to breaches of UK competition law given that the potential costs to businesses faced with such claims apart from the award are already onerous (e.g. time, resource and reputational costs). Such change may also prompt an increase in

speculative claims (aided by a developing litigation funding regime), which will likely divert limited court resources from cases with genuine substantive merit.

2.2 Change to the standard of review for CMA interim measures decisions from full merits to judicial review (Clause 120): Our view is that the right standard of appeal for interim measures is a full-merits review as opposed to judicial review. A shift from a full-merits

review to judicial review would result in less scrutiny of the CMA’s decisions. These

concerns are particularly prominent in the context of interim measures decisions i.e. they are enacted well ahead of a final (fully reasoned and evidenced) decision. As a result, there is a greater risk of regulatory error with far ranging consequences which can

significantly blunt commercial freedom and negatively impact consumer outcomes,

for example could directly lead to higher prices for consumers if restrictions are placed on dominant companies’ ability to discount. The Bill already introduces a separate "interim enforcement order" regime in relation to suspected breaches of conduct requirements by SMS firms to address issues in "fast moving" technology and digital markets (Clause 32). It is therefore unclear what further concerns the government is seeking to address in relation to interim measures decisions more generally in Competition Act cases.

2.3 Introduction of a new "acquirer focussed" jurisdictional threshold for merger control (Clause 124): The new threshold would capture any transactions involving any large

company, as the threshold could be triggered by the acquirer alone, and even where the merger parties do not have any overlap between their activities. The new threshold

therefore expands the jurisdictional reach of the CMA to review purely vertical or

conglomerate mergers (i.e. non-horizontal mergers), which are typically assessed as being less likely to impede effective competition than horizontal mergers and provide substantial scope for efficiencies. Without further refinement of the threshold to capture only those transactions which are likely to give rise to substantive concerns the case for such a

significant expansion of the CMA’s jurisdiction is unclear, especially when considering the further compliance and costs burdens that would be placed on prospective merger parties and where the Bill already provides for notifications by SMS firms to the CMA (Clause 55).

2.4 Access to documents (Clauses 118 and 134): The Bill grants further information

gathering powers to the CMA, including access to parties’ documents that are "accessible" from the premises (i.e. including documents that might be located outside of the UK). These

obligations were not included in the scope of the government’s consultation and merit further scrutiny.   We consider that such a broad increase in the CMA’s enforcement powers and

jurisdiction should be proportionately balanced with commensurate statutory protections and safeguards for parties who are unable to provide such documents to the CMA (e.g. due to foreign laws preventing data transfers) in the light of the expansion of the CMA’s powers to impose penalties on business and individuals for failure to provide documents. More

generally, we would observe that complying with information requests is burdensome and difficult process for small and large companies alike.  Despite best efforts and deploying

significant resource, mistakes can and do happen. It is imperative that competition authorities take a pragmatic approach to enforcement, reflecting the burden and complexity involved in responding to information requests.

2.5 Remedies packages in market studies and market investigations (Clauses 132 and 133): With respect to the introduction of remedies trials and the power to vary of remedies, the Bill would benefit from further consideration of protections for participating parties. For

example, introduction of statutory safeguards in the context of potential damages claims that may result from the CMA’s conclusion that a remedies package has not addressed the harm identified, noting that such safeguards would likely further incentivise parties to offer

remedies and/or participate in remedies trials (see concerns raised above regarding the

onerous costs parties face from private damages actions). Further, the Bill could be

strengthened to promote certainty for parties subject to the remedies regime. For example, the Bill could further specify the relevant parameters that the CMA would be obliged to consider in making a determination that any such remedies have been "ineffective", and

provide for greater information rights (e.g. a duty for the CMA to consult with the affected parties).

Consumer Rights and Disputes (Part 4)

3.0 We have the following concerns about the Bill’s approach to subscription traps (Part 4) that are disproportionately prescriptive (more detail is below). We believe a more principles based and outcomes-oriented approach would be more appropriate to tackle unwanted subscriptions.

· High volume of customer communications.

· Mandatory cooling-off period.

· Regulatory burden where other regulated products are sold.

· Termination of subscriptions.

3.1 High volume of customers communications: The Bill would result in a significant volume of

customer communications (pre-contract; regular renewal reminders; reminders of additional cooling- off periods; reminders every 6 months; cancellation communications). We are

concerned this volume means customers will disengage from communications that are

important, and the overall volume/level of detail is potentially disproportionate where the subscription is for relatively low amount. The list of mandated elements in these

communications means they also risk being long and therefore difficult to engage with: this may not always work well in digital media (where lots of customers prefer to interact). We would suggest the 6-monthly reminders could be removed without putting customers at

excessive risk of retaining subscriptions they don’t know about. We would also like the rules around these communication to not overly proscribe content and format but instead enable traders to make decisions for their customers based on how those customers best interact and take on board information from them. This will also allow the rules to work for the

future as methods of purchasing and communicating develop with technology. We think a focus on outcomes (customer knows what they are paying, how often and how to cancel) would work here instead of a proscribed list of information.

3.2 Cooling-off periods: Introducing a mandatory cooling-off period for all subscriptions,

including digital subscriptions, risks customers abusing the system by getting the full benefit of the subscription (for example watching an entire box set over a couple of days) without having to pay anything for it. "The longer-term risk is that business models might change to protect traders, to the detriment of customers as a whole, who may not be able to benefit from all sorts of innovative ways to purchase content. Current cooling-off rules (Consumer Contracts (Information, Cancellation and Additional Charges) Regulations) allow business to recoup the costs of any services used by customers before a cooling-off request, we would like to make sure the Bill does not override that current right. Further, the introduction of an additional ‘renewal cooling-off period’ at the end of a free period of subscription risks customers abusing the system, as they will have had ample time (during the initial cooling- off period) to establish if the subscription is one they want to keep. It is likely this sees

traders offering fewer free or discounted periods.

3.3 Regulatory burden where other regulated products are sold: We welcome the decision to exclude from this regulation products that are regulated by other regulators (in our sphere

Ofcom and the FCA). However, where we do sell subscriptions that are in scope, in addition to products regulated by Ofcom and the FCA, we are still subject to rules from different

regulators which don’t in all cases align. This risks creating customer confusion due to that mis-match and due to the burden of communications. The new rules envisage all

communications about subscriptions (whether pre-contract, reminders or renewal comms) are distinct from other communications. This means a customer with a mix of

Ofcom products, FCA products and subscriptions may see three separate pre-contract

information documents in one journey, and in-life will received a multiplicity of reminders about renewal dates. While we agree with empowering customers to make informed

decisions, we are unsure if a barrage of separate communications is the best way to deal with this and would like to be able to have the flexibility to merge communications in some situations to improve the overall customer experience, avoid disengagement and lack of understanding.  

3.4 Termination of subscriptions (Clause 255):  The Clause implies that subscriptions terminate when customer gives notice, and at that moment the subscription customer’s obligation to pay end. For most current subscriptions (whether 30 day or 12 month) a customer’s

cancellation is effective from the end of the current subscription period, until which time a customer keeps the service they are subscribed to. Under the Bill the customer will

immediately stop getting the service they are subscribing to and the trader may have to

refund for the remainder of that 30-day period. For many subscriptions that can be

consumed in an ‘unlimited’ manner (e.g. digital content), a customer can use the service to excess during a few days or months and expect a refund for the rest of the subscription

period. Some subscriptions, (e.g. home security) involve items of equipment which are costly to provide and install. If a customer can cancel at any point with no equivalent of an early termination charge those subscriptions become much less commercially viable. In addition, traders may cease to offer longer subscriptions (which customers may have got at a discount over a shorter variant) and simply offer 30-day versions. As above, this risks traders limiting the services offered to avoid the risk.  

July 2023