On 1 October 2015, the competition law provisions of the Consumer Rights Act 2015 (CRA) came into force. This marks the culmination of a series of changes to the competition law enforcement landscape in England and Wales which has taken place over recent years. The principal purpose of these amendments is to encourage greater private enforcement of competition law, in particular, by individuals and small-to-medium enterprises (SMEs). The main changes brought by the CRA are:
- Changes to the powers of the Competition Appeal Tribunal (CAT) to make it the forum of choice for competition law claims in the UK;
- The introduction of an ‘opt-out’ collective claim procedure for competition matters to operate in parallel with the existing ‘opt-in’ claim procedure before the CAT;
- The introduction of collective settlement mechanisms before the CAT; and
- The Competition and Markets Authority (CMA) will possess the ability to approve voluntary redress schemes.
The CAT will be given the power to hear standalone claims (i.e. those claims that are not based on a prior infringement decision by a competition authority) as well as the ability to hear follow-on actions (i.e. claims that must be based on a prior infringement decision by a competition authority).The CAT has also been given power to grant injunctions under similar conditions to those applicable in the High Court. Alongside these reforms, the CAT’s limitation periods will be aligned to those of the High Court. The CRA provides for the amendments of the CAT rules to reflect these changes. The new CAT rules also came into force on 1 October 2015.
A secondary aspect of the reforms is to create an efficient and cost-effective procedure for recovery of damages incurred as a result of competition law infringements. A new fast-track procedure will be introduced before the CAT. Under the new CAT rules, a hearing will be fixed within a maximum period of six months from the date of the procedure being applied and the total amount of recoverable costs will be capped on a case-by-case basis. While it was originally envisaged that the procedure would be principally for the benefit of SMEs, there is no such limitation in the CRA.
In 2002, the CAT was given the power to hear ’opt-in’ collective claims in relation to competition law infringements. That procedure has however only been used in one 2007 case (The Consumers Association v JJB Sports Plc) – the reasons for the lack of use of this procedure have been well-rehearsed and involve, among other matters, the difficulties of identifying potential claimants and persuading them to participate in a group action. In order to address these issues, the CRA introduces a new ‘opt-out’ collective claim procedure for both follow-on and standalone competition claims. The procedure is available for both individuals and businesses.
All UK-domiciled parties falling within the class will be bound by the outcome of an action unless they actively opt-out of the class. By contrast, non-UK domiciled individuals and businesses must actively opt-in to the class, if they wish to participate in the proceedings and indeed any settlement. Opt-out claims will be heard by the CAT only and will apply in parallel to the existing opt-in procedures before the CAT. Collective proceedings must undergo a certification process by the CAT and safeguards have also been put in place in order to ensure that the perceived ’excesses‘ of a US-style class action culture are not replicated as a result of these provisions.
Collective settlement procedures before the CAT
A collective settlement mechanism has also been introduced to give parties to opt-out collective procedures the ability to settle such claims. From the perspective of the claimants, this provides a mechanism to obtain early satisfaction of their claims without substantial legal costs being incurred. From the defendant’s perspective, this provides a means to bring an end to litigation involving numerous and unspecified claimants, potentially located worldwide.
Details of the claims and the terms of the settlement must be provided to the CAT which will give its approval to the scheme – provided it considers the terms are ’just and reasonable’. A collective settlement approved by the CAT is binding on all persons falling within the class of persons described in the collective proceedings provided that they are domiciled in the United Kingdom (and have not opted out of those proceedings). Non-UK domiciled claimants who have opted into those proceedings can also be beneficiaries of the procedure. This new settlement procedure does not affect the existing right to settle opt-in collective proceedings.
Voluntary redress schemes before the CMA
In parallel with the CAT reforms mentioned above, the CRA also gives the CMA the power to approve voluntary redress schemes. The scheme will enable companies who are or are likely to be subject to a competition law infringement decision by the CMA or the European Commission to agree a scheme of compensation for those harmed by their conduct in return for a reduction of up to 20% on the fine imposed by the CMA (where appropriate). The voluntary redress scheme is effectively a form of ADR which operates alongside litigation options for recovery of damages.
These reforms will address the issues which have thus far restricted the CAT from fulfilling its potential as the forum of choice for private enforcement claims. It seems highly likely that these reforms will give rise to increased levels of competition law litigation. While the various amendments appear to favour claimants by making it easier and more cost-effective to bring collective actions, they also represent an opportunity for companies involved in competition infringements to achieve an early and advantageous resolution of complex and potentially wide-ranging and costly litigation. Early resolution of such claims is also likely to have reputational benefits or at the least, to diminish some of the reputational damage inevitably associated with competition law infringements and claims.