On 1 October 2015, Schedule 8 of the Consumers Rights Act 2015 comes into force, revolutionising the regime under which victims of anticompetitive behaviour can sue for damages. Also from that date, there will be new rules of procedure in the Competition Appeal Tribunal (the “CAT”) giving effect to these changes.
The reforms are discussed more fully here but, in summary:
- For the first time in the UK in any field of law, there will be a procedure for “opt-out” class actions whereby a representative can bring a claim on behalf of an entire category of claimants (further details below).
- The CAT, which previously only had jurisdiction to hear claims which followed-on from infringement decisions by competition regulators, will now also be able to hear standalone claims (in which the existence of the infringement must be established in the action).
- The CAT will be able to grant injunctions to stop anticompetitive behaviour.
- A fast track is to be established in the CAT for the speedy and, it is hoped, inexpensive resolution of claims appropriate for allocation to that track (further details below).
Collective (or “Class”) Actions
The most notable aspect of the new regime is the introduction of “opt-out” collective actions for breach of competition law, whereby a representative can bring a claim on behalf of an entire class of claimants, except any who actively choose not to participate.
Alternatively, collective actions may be brought on an “opt-in” basis, where claimants must actively choose to be involved.
Collective actions can be particularly appropriate for infringement of competition law as damages from anticompetitive conduct are often spread amongst many victims, especially if the loss occurred (or was passed on) towards the bottom of the supply chain.
Such actions must be brought in the CAT, and are governed by Part 5 of its new rules, which also includes a procedure for collective settlements. The rules provide that unclaimed damages from opt-out actions may be used to cover the class representative’s legal costs, and otherwise go to charity. However, there is no such requirement for opt-out settlements, the rules being flexible enough even to allow reversion of unclaimed sums to the defendants; this may incentivise settlement, although the terms must be approved by the CAT as "just and reasonable".
It is difficult to predict how popular opt-out actions will be, partly because of the risk in bringing them. They will usually be paid for by third-party funders in exchange for a share of any damages and/or lawyers acting on a contingent basis. A large volume of work must be done before the CAT decides whether to certify the class, which may all be wasted if certification is not granted. However, it is expected that, sooner or later, there will be a claim large enough to justify a test case. Foreign exchange rate manipulation is an early candidate for this, depending on the European Commission’s imminently expected decision on that issue.
The Fast Track
The CAT’s fast track is primarily for the benefit of micro, small and medium-sized enterprises (as defined).
Trials should take, at most, six months culminating in a hearing of usually no more than three days.
The process is expected to be used for injunctions to stop abuse of dominance:
- injunctions because the time constraint makes most damages claims impractical; and
- abuse of dominance because anticompetitive collusion is almost always concealed so, again, probably cannot be proved within a six month process.
To this extent the fast track is a well-targeted measure, as injunctions can be far more important than damages to embryonic businesses whose existence is threatened by a dominant competitor.
Recoverable costs on the fast track will be capped, and cross-undertakings in damages for interim injunctions may be capped or waived entirely.