On Thursday 23 January 2014, the UK Government introduced the Consumer Rights Bill to Parliament.
In a major policy shift the UK Government has committed itself to reforming the competition litigation landscape to make it easier for businesses and individuals to claim compensation against anti-competitive behaviour. If passed, the Bill’s provisions are likely to make the UK the most favoured jurisdiction for bringing competition law claims in Europe.
The UK reforms go much further than those proposed by the EU in its draft Directive on encouraging private rights of action for breaches of competition law. The draft Directive is currently going through the EU legislative process.
The UK Bill includes proposals for a new form of collective action for competition claims, together with a number of other proposals for reforming the UK regime for competition law private actions. This follows the announcement of the UK Government’s proposals in January 2013 and the publication of the draft Bill in June 2013.
The Bill proposes to create a new “opt-out” collective action for competition law claims on behalf of both consumers and businesses. Proceedings can be brought before the UK specialist competition court, the Competition Appeal Tribunal (“CAT”). Under detailed certification rules yet to be published, the CAT will need to decide whether an action should proceed on an opt-in or an opt-out basis.
In an opt-in action, claimants need to opt in if they wish to become a member of the class. In an opt-out action, the claim is brought by a representative on behalf of a defined class without the need to identify each individual class members. Those class members can be consumers or businesses which have suffered loss and damage by reason of a breach of competition law occasioned by the defendants.
Any one of the defined class can act as representative for the purposes of bringing the action. The legislation also allows trade, industry and consumer representative bodies to commence class actions as a representative on behalf of the members they represent. All those falling within the opt-out class will be bound by the judgement in the case unless they opt-out. The opt-out class action procedure is open to UK domiciled claimants although individuals and companies domiciled outside the UK can apply to opt-in to the class.
Also included in the Bill are proposals for a new opt-out collective settlement regime. This based on the Dutch mass settlements regime. Under this procedure, parties will be allowed seek the CAT’s endorsement of an agreed settlement on an opt-out basis without the need for the parties to actually commence an action.
Funding is also an important part of encouraging competition law claims. Damage based agreements (“DBAs”) also known as contingency fee arrangements will be permitted for damages actions brought by individual businesses or other claimants. However, in reaction to the fear of encouraging unmeritorious class action claims, DBAs will not be permissible in the context of collective actions. Conditional fee arrangements will be permitted in collective actions. These are agreements between a lawyer and a litigant under which the lawyer recovers its fees and expenses with usually a small success fee contingent upon a successful settlement or outcome at trial. However, the uplift will not be recoverable from the losing party.