On 21 June the UK Competition Appeal Tribunal (CAT) published details of the first application to bring a class action under the CAT's new competition law collective proceedings regime. The General Secretary of the National Pensioners Convention (NPC) has issued a follow-on damages action against Pride Mobility Products Limited (Pride) on behalf of purchasers of Pride-branded mobility scooters and has asked the CAT to certify the claim as an opt-out collective action.
In a separate case, on the same day the CAT's President issued an order imposing strict caps on recoverable costs in an abuse of dominance claim brought by Socrates Training Limited (STL) against the Law Society under the CAT's new "fast-track" procedure. Whilst a number of other claimants have applied to bring claims on the fast-track (two having been withdrawn following settlement and one having being denied fast-track designation), this is the first to have reached the cost-capping stage.
The collective proceedings and fast-track mechanisms were introduced in October 2015 as part of an overhaul of the UK private enforcement regime (see here). These cases, although still at an early stage, demonstrate an increasing appetite on the part of claimants to use the new procedures, and the attractiveness of the UK - and the CAT in particular - as a venue for competition law private enforcement. The future steps in the claims will be watched very carefully by potential claimants in private competition actions. Potential defendants should be aware of the increase in their risk profile when dealing with customers and competitors.
On 1 October 2015 the Consumer Rights Act 2015 (CRA 2015) came into force, putting into effect a major overhaul of the competition litigation regime in the UK. The UK was already a favoured jurisdiction for competition law damages actions in Europe, in particular "follow-on" claims based on EU Commission cartel decisions. The reforms were intended to: (1) further promote the use of private actions (in particular by SMEs and consumers) to challenge, and to obtain effective redress for loss caused by, anti-competitive behaviour; and (2) establish the specialist CAT as the primary venue for competition actions in the UK (in circumstances where many claimants chose to bring their claims in the High Court, in particular given limits on the CAT's jurisdiction).
The reforms (discussed in further detail in our article here) included extending the jurisdiction of the CAT to cover "stand-alone" claims not based on the decision of a regulator, and to issue injunctive relief. They also provided for two new claims mechanisms, unique to the CAT:
- A collective redress regime for competition law claims, allowing group claims to be brought on behalf of a class of business or consumer claimants subject to certification from the CAT.
- A "fast-track' claims regime, designed to facilitate SMEs in particular to bring less complex private actions quickly and cost-effectively.
2. Collective proceedings
Summary of regime
Representatives seeking to bring a collective action must apply to the CAT for a collective proceedings order (CPO), authorising the representative to act on behalf of the class and certifying the claims as suitable to be brought in collective proceedings, including a determination of whether the action can be brought on an opt-in or an opt-out basis. In opt-out cases the claim can be brought on behalf of a defined group, and aggregate damages awarded to the group, without the need to identify all the individual claimants and specify their losses. UK claimants within a class are automatically included in an action unless they take specific steps to opt out.
Either a class member or a third-party representative can bring a collective action, provided the CAT authorises it to do so. The authorisation test is whether the CAT considers it "just and reasonable" for the representative to act for the class, taking into account such factors as whether the representative can fairly and adequately act in the interests of the class members, has any conflict of interest with the class members, and can pay the defendant’s costs if ordered to do so.
When deciding whether to make a CPO the CAT is required to determine whether the claims raise the same, similar or related issues of fact or law, and are suitable to be brought in collective proceedings. This will include consideration of the costs and the benefits of utilising collective proceedings, and whether it is possible to determine whether a person is or is not a member of the class. In deciding whether to certify claims on an opt-in or opt-out basis the CAT can take into account all factors it sees fit, including the strength of the claims and whether it is practicable for the proceedings to be brought on an opt-in basis (for example in light of the estimated amount of individual damages).
Despite the intense interest in the new collective proceedings regime, and an expectation that claimant lawyers would seek to utilise the new procedure shortly after introduction, until now no claim had been brought. This may be due to complexities in certain transitional provisions for the new regime, questions about the suitability of potential claims for the collective proceedings regime, or due to difficulties in securing funding.
Having threatened to bring a class action earlier this year, on 25 May the lawyers for Dorothy Gibson, the General Secretary of the NPC, lodged her application to commence collective proceedings.
Despite it being widely expected that the first collective actions would be brought in cartel cases, the NPC claim instead relates to a form of resale price maintenance (RPM). It is based on a decision of the Office of Fair Trading (OFT), now the Competition and Markets Authority (CMA), in which the OFT found Pride had infringed competition law by prohibiting its retailers from advertising prices online below its recommended retail prices. Liability is therefore not in question.
According to the published summary of the CPO application (see here), the proposed class is any person who purchased a new Pride mobility scooter in the UK in a specified period, and the issue common to all class members is whether the relevant infringements raised prices for consumers, and if so by how much. The application argues that the claim should be certified on an opt-out basis given the low level of individual damage and the vulnerability of affected customers. It also notes that the class members are easily identifiable, and that as they are final consumers there are no issues of passing-on that might complicate the analysis. The level of individual damages claimed, and potential difficulties in bringing individual claims, as well as the fact that the class members are final consumers, are likely to be important factors in the CAT's analysis of the application.
The next step will be for the CAT to hold a Case Management Conference (CMC) to hear arguments on whether a CPO should be granted and if so on what basis.
The CAT's decision on CPO will be closely watched, and the approach it takes is likely to have a significant impact on claimants' appetite to bring claims under the new procedure.
3. Fast-track procedure
Summary of regime
The fast-track procedure (FTP) was designed to allow less complex cases to be resolved more quickly and cost-effectively, with some certainty as to costs. Although not limited to such cases, the FTP was considered particularly suitable for claimants bringing stand-alone claims and seeking injunctive relief preventing allegedly anti-competitive behaviour (in particular in abuse of dominance claims).
If a claimant applies for a case to be allocated to the FTP, the CAT will determine whether this is suitable, taking into account in particular whether any of the parties is an individual, a micro-business or a SME. Other relevant factors include the complexity of the issues, whether the time estimate for the hearing is 3 days or fewer, the scale of witness and documentary evidence, and the relief sought (including the level of any damages claimed). If a case is allocated to the FTP, the main hearing must commence within 6 months of allocation, and the amount of recoverable costs must be capped (with the level at the discretion of the CAT). The CAT also has the discretion to grant an interim injunction waiving the usual requirement for the claimant to provide an undertaking as to damages or setting a cap on the amount of the undertaking.
Despite uncertainty as to the level of take-up of the FTP (in particular given that competition cases are inherently complicated, regardless of whether they involve a smaller claimant or not), a number of claimants have already sought fast-track designation in addition to STL's claim against the Law Society.
Two of those claims were stand-alone claims which settled and were withdrawn relatively shortly after the claim was filed. The first was a claim by NCRQ Limited, seeking interim injunctive relief and damages, against the Institution for Occupational Safety and Health (IOSH). NCRQ alleged that IOSH, responsible for the accreditation of qualifications in the health and safety sector, had abused a dominant position by refusing to accredit one of NCRQ's diplomas. The second was a claim by a land-owner against Tesco, seeking damages and injunctive relief, alleging that a restrictive covenant within a land transfer agreement was anti-competitive and/or constituted an abuse of dominance. These cases demonstrate early successes in the regime, in that smaller claimants were able to bring a claim and achieve a presumably satisfactory settlement.
The third claim was a follow-on damages claim based on the EU Commission's Polyurethane foam cartel decision. In this case allocation to the FTP was denied by the CAT. This decision was unsurprising given the number of parties involved, the duration of the cartel, and the likely extensive disclosure on the questions of overcharge and passing-on required. In deciding not to allocate the case to the FTP, the CAT also pointed to the lack of urgency of the claim.
The STL claim is therefore the case which has progressed the furthest to date, and the first in which the question of cost-capping has been considered by the CAT.
STL is a provider of online training including anti-money laundering (AML) and mortgage fraud training, as is the Law Society. The Law Society also provides a number of accreditation schemes for solicitors' firms, including the Conveyancing Quality Scheme (CQS). In its claim (see here) STL alleges that the Law Society started to require firms to purchase AML and mortgage fraud training from it as a condition for maintaining the CQS accreditation, and that this constitutes an abuse of dominance. It has sought damages and injunctive relief.
In May the CAT ordered a split trial into liability and damages, and agreed that the liability trial be subject to the FTP (setting down a hearing of 3-4 days duration within the 6 month window, and issuing detailed directions as to disclosure, witness and expert evidence, and the provision of information).
At a CMC on 21 June, the CAT's President dealt with the question of cost-caps, having received cost estimates from both sides. He limited the legal costs recoverable by the Law Society from STL to a maximum of £350,000 (the Law Society's costs were estimated at £640,000, which the President stated was "disproportionate" in light of the nature of the claim). He limited the legal costs recoverable by STL from the Law Society to a maximum of £200,000 (STL's costs were estimated at £220,000). Either party may apply for the caps to be adjusted if there is a material change in the case, but the President indicated that this would be applied strictly.
This is an important ruling, as it is the first indication of how the CAT will apply its cost-capping power. It remains to be seen whether the approach taken will encourage or deter claimants from bringing claims under the FTP. Claimants will need to weigh the certainty as to the level of their exposure to the defendant's costs with the limitation on the extent to which they can recover costs if successful, and consider the level of actual costs involved in the context of the level of damages claimed/financial impact of the injunctive relief sought.