Digital Markets, Competition and Consumers Bill
36.This Bill, which had its second reading in the House of Lords on 5 December, regulates competition in digital markets and makes provision for the protection of consumer rights. The Department for Business and Trade and the Department for Science, Innovation and Technology have provided us with a delegated powers memorandum (“the Memorandum”).18
37.We draw the attention of the House to five delegated powers in the Bill.
Clause 6—position of strategic significance
38.Clause 2(2)(b) allows the Competition and Markets Authority (“the CMA”) to regulate a designated undertaking in respect of digital activities if (among other things) the undertaking has a “position of strategic significance”.
39.Clause 6(1) states that an undertaking has a position of strategic significance in respect of a digital activity where one or more of the following conditions is met:
(a)the undertaking has achieved a position of significant size or scale in respect of the digital activity;
(b)a significant number of other undertakings use this digital activity in carrying on their business;
(c)the undertaking’s position in respect of the digital activity allows it to extend its market power to a range of other activities;
(d)the undertaking’s position in respect of the digital activity allows it to determine or substantially influence the ways in which other undertakings conduct themselves, in respect of the digital activity or otherwise.
40.Clause 6(2) allows the Secretary of State to rewrite clause 6(1) by varying the conditions. Because this is a Henry VIII power, the affirmative procedure is applicable.
41.The Memorandum19 offers the following justification for the Henry VIII power in clause 6(2):
- to adapt to changes in the market; and
- because of the potential for future technologies, patterns or business models to change.
42.Changes in markets happen constantly. If this were a reason for allowing ministers (rather than Parliament) to amend the Act, it would be a reason for converting even more of the Bill’s delegated powers into Henry VIII powers.
43.Furthermore, the conditions in clause 6(1) are not inherently technology-dependent or business-model-dependent. They relate to how significant an undertaking is in market terms, regardless of whether technology and patterns of business change or not. It is true that market developments might cause the CMA to alter its assessment whether a particular undertaking has substantial and entrenched market power or a position of strategic significance. But this is a factual matter that doesn’t require the legal principles in clause 6(1) to be amendable by ministerial regulations.
44.Given the Memorandum’s unconvincing explanation for the clause 6(2) power, the House may wish to press the Minister for a fuller explanation. In the absence of a satisfactory explanation, we regard clause 6(2) as containing an inappropriate delegation of power that should be removed from the Bill.
Clause 110—power to charge levy
45.Clause 110 contains a broad power for the CMA to charge undertakings it regulates. This levy will be set by rules made by the CMA, to which no parliamentary procedure applies. So far as Parliament is concerned, the CMA’s only duty (when consulting) is to lay a draft of the rules before Parliament. The draft rules do not have to be debated or approved, and the finalised rules do not even have to be laid before Parliament.
46.The Memorandum20 offers three reasons for not attaching any parliamentary procedure to the making of the rules.
- The principles for levy methodology are set out on the face of the Bill (clause 110(4)) and are thus transparent to industry, Parliament and other interested parties.
- The absence of a parliamentary procedure does not preclude parliamentarians from tabling a motion to debate the content of the rules.
- It would be disproportionate to provide any further parliamentary scrutiny beyond setting out the principles underlying the levy methodology contained in clause 110.
47.We are not convinced by these reasons.
48.First, innumerable regulation-making, order-making and rule-making powers in primary legislation contain constraints on the exercise of such delegated powers and yet still have a parliamentary procedure (negative, affirmative or super-affirmative) associated with their making.
49.Second, if a parliamentary procedure were unnecessary providing that the principles underlying the subordinate legislation are set out on the face of the Bill, little subordinate legislation would come with any parliamentary procedure at all.
50.Third, even if either House of Parliament were to debate the draft rules and pass a resolution disapproving them, the CMA would not be bound by the resolution. This is because unless an Act of Parliament says otherwise (and this Bill does not) mere resolutions of either House have no legal effect. Because the rules are not contained in a statutory instrument, the Statutory Instruments Act 1946 (“the 1946 Act”) is inapplicable. Accordingly:
- The numbering, printing, citation and strict publication requirements of section 2 of the 1946 Act are inapplicable.
- The procedure by which a negative instrument, if successfully prayed against, would automatically be rendered unenforceable under section 5(1) of the 1946 Act would not apply.
- Although the Memorandum says that parliamentarians will be able to engage with a draft of the rules and will be consulted at a point that will allow for meaningful input, few individual parliamentarians have time to engage with highly technical rules that have not yet been made. This is one of the reasons why Parliament has specialist scrutiny committees. But these rules, not being contained in a statutory instrument nor subject to a parliamentary scrutiny procedure, would not fall within the remit of the main delegated legislation scrutiny committees - the Joint Committee on Statutory Instruments (JCSI) and the Secondary Legislation Scrutiny Committee (SLSC).21
51.Fourth, given that clause 298 applies the negative procedure to regulations setting fees for alternative dispute resolution accreditation, it seems reasonable that the negative procedure also applies to instruments requiring people to pay a levy to the CMA.
52.We recommend that the rules made pursuant to clause 110 be made by statutory instrument, with the negative procedure being sufficient.
Clause 204(1)—power to amend fixed or daily penalties
53.The Bill contains various powers for the CMA and the courts to impose monetary penalties on relevant persons: see clauses 157(5), 167(3)(a) and (b), 181(6), 189(3)(a) and (b), 192(3)(a) and (b) and 197(4). These powers all have carefully calibrated maxima. By way of example, clause 181(6) stipulates that a monetary penalty imposed under clause 181(4)(b) must be a fixed amount not exceeding £300,000 or, if higher, 10% of the total value of the turnover (if any) of the person being penalised.
54.Clause 204(1) allows the Secretary of State to amend any of those provisions for the purpose of substituting a different monetary amount for those contained in the Bill.
55.The Memorandum22 explains that this is “to avoid erosion of the real value of these maxima through inflation” so that the punitive and deterrent effects of the penalties are not diminished. However, this explanation does not carry across into the Bill itself. The power in clause 204(1) is open-ended and not limited to inflation-proofing. The Government could use the power in clause 204(1) to introduce inflation-exceeding increases in the various monetary penalties in the Bill. In turn this would allow ministers to override the carefully calibrated maxima set by Parliament without being limited to inflation-proofed increases.
56.We recommend, consistently with the explanation set out in the Memorandum, that the power to amend the various monetary penalties mentioned in clause 204(1) can only be used to take into account changes in the value of money.
Schedule 16, paragraph 16I(1)—power to amend fixed or daily penalties
57.Schedule 16, paragraph 16I(1) contains a similar power to the power in clause 204(1) and with the same rationale – to take into account changes in the value of money.23 We likewise recommend that the power to amend the various monetary penalties mentioned in paragraph 16I(1) of Schedule 16 can only be used to take into account changes in the value of money.
Clause 231—right to redress
58.Clause 231 allows the Secretary of State to make regulations governing the statutory rights of consumers relating to unfair commercial practices. The regulations are wide-ranging in scope and cover matters such as monetary compensation, discounts, refunds and termination of contracts.
59.The Memorandum24 states that the affirmative procedure is appropriate for the first exercise of the power to make regulations because those regulations will have the effect of replacing the private redress of the Consumer Protection from Unfair Trading Regulations 2008. However, the Memorandum adds:
“Subsequent exercises of the power (in clause 231) will be amending or limiting the regulations and as such the negative procedure will provide an appropriate level of parliamentary scrutiny.”
60.We find this explanation unconvincing. Who is to say that subsequent exercises of the power in clause 231 will merely amend or limit the regulations? The Bill certainly does not; it is silent on the question. Just as there is nothing in the Bill to prevent the first exercise of the power being relatively cautious in policy terms, so also there is nothing to stop subsequent exercises of the power in clause 231 being more adventurous - revoking, re-making and extending (perhaps substantially) the original regulations.
61.We judge powers not on how the Government say that they will use them but on how any Government might use them. It is therefore not sufficient for the Government to say that subsequent exercises of the power will only amend and limit the original regulations. They could replace and extend the regulations within the powers given expressly by clause 231 (and impliedly by section 14 of the Interpretation Act 1978). Accordingly, we recommend that the affirmative procedure should be applicable for all exercises of the power in clause 231, and not just the first exercise of the power.
18 Department for Business and Trade and the Department for Science, ‘Memorandum to the Delegated Powers and Regulatory Reform Committee on Digital Markets, Competition and Consumers Bill’ (November 2023): https://publications.parliament.uk/pa/bills/cbill/58-03/0294/DelegatedPowersMemo.pdf [accessed 7 December 223]
19 Paras 25 and 26.
20 Paras 103 and 104.
21 The JCSI considers all statutory instruments, whether or not subject to a parliamentary scrutiny procedure, and any other instrument which is subject to the affirmative resolution procedure. The SLSC considers all instruments, whether or not statutory instruments, subject to a parliamentary scrutiny procedure.
22 Para 278.
23 Para 292.
24 Para 328.