Judicial review appeals standard on CMA decisions should not be watered down, says Lords Committee
21 July 2023
The Communications and Digital Committee writes to Kemi Badenoch MP, Secretary of State for Business and Trade to set out its recommendations on the Digital Markets, Competition and Consumers Bill.
- Review of the Digital Markets, Competition and Consumers Bill: Letter to Rt Hon Kemi Badenoch MP, Secretary of State for Business and Trade, Department for Business and Trade, dated 21 July 2023
- Inquiry: Review of the Digital Markets, Competition and Consumers Bill
- Communications and Digital Committee
The letter follows a short inquiry which saw the Committee take evidence from consumer groups, UK tech start-up, big tech firms, the Competition and Markets Authority (CMA) and ministers.
The Committee welcomes the Digital Markets Bill, saying its objectives are sound and its measures proportionate, but stresses that timely implementation is crucial as the UK is falling behind the EU in regulating the digital space and this is having a negative effect on consumers and British businesses. The Committee states that there is insufficient competition in digital markets and successful implementation of the Bill will help UK businesses to thrive and ensure consumers benefit from more choice and lower prices. The Committee urges the Government to pursue swift passage of the Bill through Parliament.
The letter sets out some areas where further action would be beneficial, alongside recommendations to resist pressure to weaken some of the Bill’s measures.
The Committee concluded that the balance of evidence clearly shows judicial review is the appropriate standard for appeals against CMA regulatory decisions and should not be changed to full merits appeals or Judicial Review.
The Committee heard wide-ranging evidence to suggest a full merits or JR+ system would undermine the viability of the proposed regulatory regime and incentivise big tech firms to take an adversarial approach to the regulators. It would also slow down the regulatory process which would undermine the central objective of the legislation, which is a regulatory approach fit for an increasingly fast-changing digital world. The Committee says the judicial review standard in the Bill ‘must be maintained’ and the Government should resist any move to change to a full merits process.
The countervailing benefits clause in the Bill provides a defence to a firm accused of breaching the rules if it can show its actions provide a significant consumer benefit.
Some concerns have been raised that this will give big tech firms a loophole to avoid compliance with competition regulations. Others argued that the test for application of this exemption was set suitably high and would not be regularly used. The Committee concludes that the exemption is a ‘proportionate backstop’ as long as the threshold for its use remains high, and the Government should resist proposals to lower that threshold.
The CMA is receiving substantial new powers: transparency and accountability will be crucial in ensuring public and industry confidence in its work. The Committee calls on the CMA to be proactive in ensuring its new powers are accompanied by clear and open communication with relevant businesses and organisations affected by its work. The Committee also says it expects Parliament to play a key role in keeping the work of the CMA under review and holding its leadership to account.
Baroness Stowell of Beeston, Chair of the Communications and Digital Committee, said:
“The UK has fallen behind other jurisdictions in tackling digital competition, so we are pleased the Government has brought forward the Digital Markets Bill. Broadly, we think the Bill strikes the right balance. This is about promoting innovation and a level playing field that benefits the UK economy and British consumers – it’s not about bashing big tech.
“Some firms and policy-makers have concerns about the new regime, and the powers being handed to the new regulator. We reviewed these issues carefully because we understand the significance of changing our regulatory framework. But those concerns are not an argument for weakening the Bill, particularly on the judicial review standard, because the case for change is clear and has been made. The Government should resist any proposals that would risk weaker enforcement measures and endless appeals processes.
“We therefore urge the Government to resist pressure to muddy the waters with a full merits or JR+ appeals process which would undermine the regulatory regime and add unnecessary delays.
“The proposals in the Digital Markets Bill will give the CMA significant new powers and a much wider role. The CMA itself must be held accountable for its performance and outcomes. Parliament has a key role to play here, and we look forward to continuing to engage on this matter further.”