On 26 March 2015, the Consumer Rights Act, which makes a number of important changes to the UK competition regime in order to facilitate private enforcement, received Royal Assent. The Act is expected to come into force on 1 October 2015.
The Government is determined to give private parties, in particular SMEs and consumers, the necessary tools to enforce competition law through private court actions and to provide effective redress for loss caused by anti-competitive behaviour. Although the UK is already one of the jurisdictions of choice for private damages claims, the Government was keen to make the regime more claimant friendly, by reducing the complexity and cost involved in bringing such cases, while at the same time avoiding the risk of unmeritorious claims and the creation of a 'litigation culture'.
In summary, the reforms include the following measures (for a more detailed description of these measures see our e-bulletin on the proposals here):
- A competition specific opt-out collective actions regime in the Competition Appeal Tribunal (CAT), for both stand-alone and follow-on claims. This will allow for claims to be brought on behalf of a defined group and damages to be awarded to the group, without the need to define all the individual claimants. Claimants within a class are automatically included in an action unless they take specific steps to opt-out. The opt-out aspect will only apply to UK domiciled claimants, but non-UK claimants will be able to opt-in to the claim if they wish to participate.
The regime incorporates a number of safeguards in order to avoid frivolous or unmeritorious litigation. When certifying a class action the CAT will have to consider whether a collective action is the best way of pursuing that particular claim, and whether it should proceed on an opt-in or an opt-out basis. It will also need to assess whether the claims in the class raise the same, similar or related issues and whether a preliminary merits test is met. There will be no treble damages (as is the case in the US) and any unclaimed damages following a damages award to a class will have to be paid to the charity prescribed by order by the Lord Chancellor.
- Extension of the CAT's jurisdiction, which will now have jurisdiction to hear stand-alone cases which at the moment can only be brought in the High Court or Court of Session in Scotland. The limitation periods for bringing claims in the CAT will be aligned with those for claims in the High Court (six years instead of two years) and the Court of Session in Scotland (five years).
- A 'fast track' claims procedure in the CAT for 'simpler' cases, designed to allow such cases to be resolved more quickly and inexpensively. This is intended to benefit (but is not limited to) SMEs in particular and there will be a presumption that any case brought by an SME will be considered for the fast track. A new opt-out collective settlement regime for competition law in the CAT designed to allow businesses to settle cases quickly and easily, on a voluntary basis. A representative of those who have suffered loss and a potential defendant can jointly apply to the CAT to approve, on an opt-out basis, a mutually agreed settlement agreement. The opt-out nature of the settlement will only apply to UK claimants but non-UK claimants will be able to opt-in.
- Voluntary redress schemes under which companies found to have infringed UK or EU competition rules voluntarily agree to pay compensation to those harmed by their infringement. Such a scheme will need to be set up in accordance with the rules set out in Regulations to be published by the Secretary of State and will need to be approved by the CMA.
The reforms also require a number of changes to the CAT Rules of Procedure in order to deal with collective actions, collective settlements and other changes introduced by the Consumer Rights Act and the Government is currently consulting on the CAT's revised Rules. The CMA is also consulting on draft guidance on its new power to approve voluntary redress schemes.
The new legislation, once in force, is intended to lead to a significant rise in the level of private competition litigation in the UK, which will increase the burden on business and create new opportunities for bringing claims. This reinforces the need for all companies to have an effective competition law compliance programme in place.