The Consumer Rights Act 2015 (the "CRA15") received Royal Assent yesterday. The CRA15 introduces class actions for competition law claims. This is the first time opt-out class actions have been permitted in the UK.  

The UK Government is introducing a package of measures that will radically alter the current approach to claims for breach of competition law. The most significant change is the introduction of US style opt-out class actions in the UK for the first time, but other important changes are being made, all with the objective of encouraging and facilitating private enforcement of competition law in the UK. England is already the main European venue for competition claims, but the UK Government wants to make it easier for claimants to bring claims in the specialist Competition Appeals Tribunal ("CAT"), thereby remedying the difficulties faced by claimants in the past.    The changes, when they come into effect in October 2015, are likely to see a step change in the number and type of claims being made. The impact could be felt by any business, many of which could find themselves as potential claimants or defendants. It is no secret that preparations are already underway for the first class actions to be made and businesses should be prepared for these types of claim.

The key elements of these reforms are* :

Class Actions

  • The CAT will now have powers to hear class actions for breach of competition law, on either an opt-out or opt-in basis. Under the CRA15 regime, claims can be brought either by a representative claimant or by a third party (for example, a representative body such as a trade or consumer association).    

  • If the CAT approves an opt-out class action, all eligible claimants domiciled in the UK will be included in the action automatically, unless they choose to opt-out. Overseas claimants will not be automatically included in the class, but they can ask to opt-in to the class. The CAT could alternatively approve the claim as an opt-in class action, covering only claimants who choose to join.  

  • An award of damages can be made without the CAT undertaking an assessment of the amount of damages recoverable by each represented person.  

  • In relation to opt-out class actions, any monies not claimed within a specified period will be paid to charity or may be paid to meet the representative claimant's legal costs.  

  • There are some protections for defendants. The CAT will only certify a class action following consideration of whether the case is suitable. Claims are only eligible for inclusion if the CAT considers that they raise the same, similar or related issues of fact or law. The individual or body bringing the class action has to be an appropriate representative and the CAT will decide whether it is just and reasonable for that person to act as a representative.  

  • Claimants will not be able to recover treble or exemplary damages.  

  • The representative claimant will remain exposed to the cost of bringing proceedings as the "loser-pays" principle will apply. Contingency fees (or damages based agreements) cannot be used for opt-out class actions, although no-win-no-fee conditional fee arrangements, third party funding, and after-the-event insurance will be available.

Collective settlements/voluntary redress schemes

  • The CAT will be able to approve collective settlements both where a class action has been brought and, most significantly, in circumstances in which no class action has been brought. A collective settlement will only be approved by the CAT if it is satisfied that the terms are just and reasonable. It will be binding on all persons falling within the class described in the collective settlement order, although it will not be binding on a person who opts-out or is not domiciled in the UK.  

  • The CRA15 also gives the Competition and Markets Authority (the "CMA") the power to certify voluntary redress schemes submitted by a business. The CMA is currently carrying out a consultation in relation to its draft "Guidance on the CMA's approval of voluntary redress schemes". The CMA is proposing to publish its guidance in October 2015.

Other Important Reforms

  • The current restrictions on the scope of the CAT's jurisdiction will be removed so it can hear stand-alone damages claims as well as follow-on claims.  

  • The CAT will have powers of injunctive relief, which will have the same effect, and can be enforced, as if it is an injunction granted by the High Court. The CAT will also introduce a fast-track claims procedure.  

  • The relevant limitation period for claims to be brought in the CAT will in future be the same as the limitation period for claims before the High Court (a primary period of six years).

New CAT Rules to govern collective proceedings and collective settlements

In addition to the above, new CAT procedural rules will be introduced making detailed provisions to accommodate the above changes. Guidance on the CMA's approval of redress schemes is being prepared. The draft CMA guidance and the draft CAT rules are both currently subject to consultation.