Introduction

After a slow start since their introduction in 2015, collective competition damages claims are now a significant feature of the UK competition landscape, with around 54 claims currently under way, involving products and services ranging from e-commerce marketplaces to farmed salmon.  The courts have needed to resolve numerous questions along the way, including the threshold for collective claims to be brought, limitation periods and funding arrangements. However, the first claim has reached trial (and is awaiting judgment), and the first settlement has been concluded and approved, and the pace of progress in these claims is increasing. 

This article provides an overview of the regime, and outlines some of the key issues considered by the Competition Appeal Tribunal and higher courts.  The law is stated as at 17th October 2024.

Background

In 2015, the Consumer Rights Act 2015 inserted a new section 47B of the Competition Act 1998, introducing a collective competition proceedings regime, allowing for US-style class actions to be brought in the Competition Appeals Tribunal (CAT) for breaches of competition law (although with the intention of avoiding some of the perceived excesses of the US regime).  Collective Proceedings Orders (CPOs) allow a class representative to bring a claim against a company that has breached UK competition law, on behalf of a group of individuals or businesses who have been affected in the same, or a similar, way by the anti-competitive behaviour.  The new regime was intended to address the barriers to justice that individuals face when bringing actions against large corporates, given the risk and cost associated with such claims on an individual level.  Earlier collective claims brought as bundles of hundreds or thousands of individual claims, or under a previous version of section 47B allowing a specified consumer body to bring claims on behalf of consumers, had proved unwieldy and costly.

A slow start

The regime got off to a slow start, with the first two claims, both registered in 2016, initially failing at the certification stage, as outlined below.  Very few additional proceedings were brought until the milestone Supreme Court ruling in 2020 in the first of these claims, Walter Hugh Merricks CBE v Mastercard Incorporated and Others.  This acted as a catalyst for the regime by lowering the threshold for certification.  The first CPO was granted shortly after in Justin Le Patourel v BT Group PLC in 2021, six years after the regime was first introduced, marking a significant step in the progress of the regime, with the pace showing no signs of slowing since.  As more claims progress, several high-profile rulings have shaped the UK collective proceedings landscape, with the parameters of competition law being tested as claimants try to capitalise on the benefits of the regime.

Process of bringing a collective action

Collective actions are brought by a proposed class representative (PCR) on behalf of a proposed class who have been affected by the alleged breach of competition law.  The PCR need not be a member of the proposed class but, to be authorised, the CAT must consider it ‘just and reasonable’ for them to act for the class.  They must present the CAT with a ‘blueprint’ to trial, outlining the issues of the claims (breach of competition law, causation and proof of loss), and how they can be resolved at trial, including detailed evidence of funding for the case.  Once the PCR is authorised, the CAT must certify the claims as being ‘eligible’ for inclusion in collective proceedings by way of granting a Collective Proceedings Order (CPO).  Claims can proceed only if they gain certification.  To be eligible, the CAT must consider that the claims

1. are on behalf of an identifiable class,
2. raise the same, similar or related issues of fact or law, and 
3. are suitable to be included in collective proceedings.

The CAT originally declined to grant a CPO in Merricks, essentially on the basis that it was not clear that it could be established that any overcharge had been passed on to customers and that Mr Merricks had not demonstrated that there was a plausible way of calculating the loss suffered by each individual claimant – a fundamental element of the compensatory principle inherent in English law damages claims.  On appeal, the Supreme Court held that the CAT had imposed too strict a test.  It was sufficient that collective proceedings were more suitable than a series of individual claims.  It also held that the legislation modified the compensatory principle, requiring only that the distribution of damages should be fair and reasonable.  The Supreme Court also established that there is no assessment of merit at the certification stage - this is exclusively addressed at trial.  As expected, the establishment of this lower threshold opened the floodgates to new collective proceedings.

Before granting a CPO, the CAT must also decide whether the action should be brought on an opt-in or opt-out basis.  Historically, proceedings before the English courts could only be brought on an opt-in basis whereby each claimant was required to join the proceedings individually, in order to be included in the claim.  However, a key feature of the Consumer Rights Act 2015 is that it introduced the opt-out option. In opt-out cases, all individuals falling within the described class are included in the claim unless they expressly opt-out.  This can give rise to substantial class sizes – for example 46 million individuals in Merricks.

Developments

Following the Merricks ruling, the CAT has increasingly given ‘second chances’ to PCRs whose applications are initially rejected, providing an opportunity for them to reformulate their applications instead of being struck out. For example, in Dr Liza Lovdahl Gormsen v Meta Platforms, Inc and Others, the PCR was given six months to “have another go” at producing a “new and better blueprint” for trial.  This approach has extended beyond the content of the CPO application: for example, in Michael O’Higgins FX Class Representative Limited v Barclays Bank PLC and Others, the PCR was given three months to submit a revised application on an opt-in basis.  While this new-found leniency on the part of the CAT points to the intention of enabling access to justice, it creates further risks for defendants who face longer periods of uncertainty/litigation and therefore increased costs, knowing that the CAT will ensure that the inexperience of PCRs will not allow defendants to avoid responsibility for any alleged competition law breaches.

The proliferation of claims has gone hand in hand with the increasing involvement of third-party funders. This has forced the CAT to address the issue of carriage disputes whereby two or more overlapping (competing) CPO applications are made – the approach has developed as more cases come before the Tribunal.  Initially, as seen in O’Higgins v Barclays Bank, and Evans v Barclays Bank, the CAT addressed the issue of carriage disputes once it had decided that both competing claims met the CPO eligibility and certification criteria.  However, in subsequent cases, the CAT clarified that carriage disputes are to be decided as a preliminary issue before reaching the certification stage, saving the time and costs associated with two CPO applications.  In this situation, the CAT must decide which PCR ‘would be the most suitable’, in order to reach an outcome which is in the best interests of the class and fair to the defendants.  When deciding ‘suitability’, the CAT considers

• the definition of the proposed class/scope of claims;
• the quality of the PCRs’ ‘blueprint’ to trial/methodology; and
• the experience of the PCRs’ lawyers.

There is no consideration of which claim was filed first.  The increase in carriage disputes also raises the question of whether the collective proceedings regime is being used for its intended purpose of justice..  In Mr Justin Gutmann v Apple Inc and Others, the CAT made it clear that it will be ‘astute to ensure that a system intended to further access to justice does exactly that, and does not become a “cash cow” either for lawyers or for funders’.  The CAT is also likely to address these issues in its judgment in Justin Le Patourel v BT Group PLC (in which judgment is pending), in which it will address the distribution of damages and therefore the returns available to funders.

A key characteristic of collective proceedings, set out in section 47C(2) of the Competition Act 1998 and noted by the Supreme Court in Merricks - is that damages are awarded on a class-wide, aggregate basis, eliminating the need to calculate individual losses.  There is, however, no definitive direction on the process of distributing damages following a successful collective action, as was pointed out in Justin Le Patourel v BT Group PLC.  The Court of Appeal stated that there was no indication in the Competition Act 1998 or the Tribunal Rules of ‘how, once the money is in the hands of the representative or authorised third person, the damages are thereafter in practical terms to be distributed to the class’, something which is likely to be addressed once the currently reserved judgment is published. All that is clear at this stage is that where the CAT awards damages in collective proceedings, it must order the damages to be paid on behalf of the class to:

1. the class representative; or
2. a person other than a member of the class, as the Tribunal sees fit.

CAT Rule 93(4) then provides that any damages that remain undistributed at the end of the distribution process will be donated to a nominated charity. 

A further important issue is the matter of settlements and how these will work in practice, particularly in opt-out proceedings, given the size of the class represented.  In opt-in claims, there is no requirement for approval from the CAT, but the class representative may not agree any settlement prior to the deadline for opting-in, without the approval of the court. In this case, each claimant has the right to make its own decision on the settlement.  In opt-out claims, however, the process is more regulated: a collective settlement order must be granted by the CAT, which requires it to verify that the settlement terms are ‘just and reasonable’, taking into account the following factors:

• the settlement figure;
• the estimated number of claimants likely to be entitled to a share;
• likelihood of a judgment for an award exceeding the proposed settlement amount; and
• estimated cost and duration of proceedings if they continue.

December 2023 saw the first settlement, albeit only a partial settlement, in the case of Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others.  In this case, taking into account the fact that the settlement was with only one of multiple defendants, and due to the relatively small sum compared to the large class, the CAT ordered that the sum should be held in escrow and distributed at the end of proceedings, or when the class representative deemed it ‘economical, proportionate and in the interest of the class to seek to distribute it’.  This settlement, for a sum of only £1,120,000, should not deceive businesses into thinking that future settlements or awards of damages will be equally small: while some claims will no doubt be dismissed or will result in minimal damages, some are likely to involve very substantial sums. 

A further development in Merricks also highlighted the need for a wider review of the CAT rules on limitation periods.  As it currently stands, under the Competition Act 1998, the limitation period for bring a claim is six years from the later of:

1. the date on which the competition infringement ceases; and
2. the date on which the claimant knows or could reasonably be expected to know of the infringement.

The Merricks case raised the issue of who is the relevant party for the purpose of determining whether the claimant knew or could reasonably be expected to know of the infringement.  The CAT held that the requisite knowledge is that of the class representative.  Following this judgment, the CAT is likely to need to add further clarification in subsequent cases.

The landmark PACCAR judgment in 2023, arising out of the truck cartel claims has created a very significant potential obstacle for claims under the collective proceedings regime, as it renders most existing litigation funding agreements (on which this type of claim is very heavily reliant) in opt-out claims unenforceable. The previous Government pledged to reverse the ‘damaging effects’ of the judgment, introducing the Litigation Funding Agreements (Enforceability) Bill to restore the pre-PACCAR position. Ongoing cases appear to have sidestepped this issue effectively, with the CAT upholding the validity of the funding arrangement in Alex Neill Class Representative Limited v Sony, for example- a promising decision for claimants and funders.  Despite this, the King’s Speech did not mention the introduction of proposed legislation on this subject, so it is yet to be seen what legislation, if any, will be enacted post-PACCAR, and what the long-term implications of the ruling will be.  Whether this will disincentivise funders, and therefore affect access to justice for consumers, will become apparent in the coming months.

2024 has seen a growth in claims, fuelled by third-party funders and claimant-focused law firms with an increasing frequency of class action claims that push the boundaries of competition law, apparently trying to capitalise on the opt-out procedure, which is not available for claims other than competition claims.  This approach has seen a number of claims targeting big technology companies, for example, in claims that appear to relate more closely to data protection law than competition law, and ESG-based claims following increased public and regulatory interest in certain sectors, using the competition regime to allege loss resulting from abuse of a dominant position. Such claims include those brought by Professor Caroline Roberts who has brought a series of related claims against six large water companies claiming that they abused their dominant market position by underreporting sewage spills, and therefore charged customers higher prices than would have been allowed if reporting was correct.  Although still awaiting certification, these opt-out claims pose a threat to companies that may previously have considered themselves to fall outside the scope of opt-out collective proceedings in areas such as environmental liability.  Companies in a wide range of industries should therefore consider the extent to which they are exposed to imaginative collective competition claims in non-traditional areas, as the threat is broader than once thought.

No signs of slowing down

The rise in collective actions in the UK means that major companies face a significant and growing exposure to large scale claims.  More clarity on the future trajectory of the regime is likely to be provided as the long-awaited judgment in the first opt-out UK class action claim to reach full trial is likely to be published soon.  For large corporations, the Le Patourel judgment may outline key risks and considerations when navigating this evolving legal environment.  Companies in the tech and ESG sectors in particular should be vigilant as the rise in collective actions coincides with an increase in regulatory scrutiny, with regulatory investigations acting as a springboard for class action claims.  With the pace showing no signs of slowing, 2024/5 will bring significant developments in this regime, providing further guidance on case management and perhaps further indications of the scale of damages that may be awarded in these claims.

For more information, or further guidance in this area, please contact Peter Willis and Flora McCarthy.

VISIT OUR COMPETITION LAW HOMEPAGE