On 29 January 2013 the UK Government’s department for Business, Innovation and Skills (BIS) published the Government’s response (the Response) to its 2012 Consultation on options for reform of the private actions regime to compensate victims of competition law breaches. The intended changes set out in the Response mark a fundamental policy shift from the present regime, in that they are designed actively to promote and facilitate litigation. They are likely to make the UK’s Competition Appeal Tribunal (CAT) a magnet for competition litigation within Europe.

The key areas of reform to the UK’s competition litigation regime include:

  • extending the CAT’s jurisdiction to make it the major venue for competition actions in the UK. The CAT will gain jurisdiction to hear ‘stand-alone’ claims where there is no prior regulatory decision (as well as ‘follow-on’ actions where there is such a decision, as at present) and will also be able to grant injunctions. A ‘fast-track’ system will also be introduced, intended to benefit in particular small and medium-sized enterprises (SMEs);
  • introducing a limited ‘opt-out’ collective actions regime to facilitate mass damages claims in competition law cases. The interests of claimants and defendants are to be balanced by a number of safeguards, including through judicial control over the entities that can bring opt-out actions and whether it is appropriate for the claim to be brought on an opt-out basis; and
  • encouragement of alternative dispute resolution (ADR), including by establishing a new opt-out collective settlement regime in the CAT.  

Background to the response

The Response forms the second major part of the Government’s vision to reform the UK’s competition regime, which already includes institutional change to merge the OFT and Competition Commission into a consolidated Competition and Markets Authority (the CMA); changes to strengthen the regulators’ powers in relation to the market investigations, mergers and competition enforcement regimes; and changes to the criminal cartel offence (removing any requirement of dishonesty). The issue of private enforcement and the need to facilitate the bringing of damages actions has been on the table for some time, both in the UK and Europe. The European Commission has long sought to encourage private damages actions, following its 2005 Green Paper and 2008 White Paper on the subject, but concrete proposals in the form of legislative measures at the EU level have been repeatedly delayed and have not yet emerged. The UK Government consulted on options for reform in 2012. Almost 130 responses were submitted by stakeholders in the private actions regime. After reviewing the submissions, the Government has now published its Response setting out how it proposes to reform the UK’s competition litigation regime.

Expanded jurisdiction of the CAT

The Response proposes to make the CAT the primary venue for competition litigation in the UK, capitalising on the CAT’s expertise in competition law, its system of active case management and the cross-disciplinary expertise of its membership, all of which make it well suited to handling complex competition litigation. To this end, the Government has decided:

  • to extend the CAT’s jurisdiction to allow the CAT to hear stand-alone as well as follow-on cases;
  • to enable the courts to transfer both stand-alone and follow-on cases to the CAT;
  • to harmonise the limitation periods for CAT actions with those of the High Court (and the Court of Session in Scotland);
  • to enable the CAT to grant injunctions, with flexibility to dispose of the usual requirement to give a cross-undertaking in damages; and
  • to introduce a fast-track procedure for ‘simpler’ competition claims in the CAT, to be brought principally by SMEs.

The extension of the CAT’s jurisdiction to allow it to hear stand-alone claims, and to grant injunctions, was long overdue and is to be welcomed. The alignment of the limitation periods applicable in the CAT with those of the High Court will prevent unnecessary twin-track litigation, improving efficiency and legal certainty for all parties.

However, other elements of the Response should be met with caution. In particular, the introduction of a fast-track regime including the imposition of cost caps and caps on the level of cross-undertakings in damages will no doubt increase the number of cases brought before the CAT and will also do away with a number of protections available to defendants under the current regime (and in the High Court). As a result, claimants on the fast-track may be able to pursue claims and seek injunctions with little or no costs exposure.  

‘Opt-out’ collective actions

The Response also states that the Government intends to introduce a limited ‘opt-out’ collective actions regime, which would allow group claims to be brought by approved representative bodies on behalf of classes of business or consumers (or a combination of the two) who do not choose to opt-out of the claim.

The Response proposes to:

  • introduce a limited form of ‘opt-out’ collective actions regime, with safeguards, for competition law claims. The regime would apply to both follow-on and stand-alone cases, with cases to be heard only in the CAT;
  • require the CAT to certify whether a collective action brought under the regime should proceed on an opt-in or an opt-out basis, and to certify the type of representative bodies permitted to bring such cases;
  • provide that the underlying claimants in such cases could be consumers, businesses, or a combination of the two. The claims should be able to be brought either by claimants or by genuine representatives of the claimants, such as trade or consumer associations. Law firms, third party funders and special purpose vehicles are expressly excluded from bringing opt-out claims;
  • introduce a range of safeguards intended to protect against unmeritorious cases being brought. Those safeguards include the judicial certification referred to above; the prohibition of treble or exemplary damages or damages-based agreements (DBAs); and the application of the loser-pays rule in the assessment of costs; and
  • provide that any unclaimed sums will be paid to the Access to Justice Foundation.

The introduction of collective actions is a significant development through which the Government aims to boost collective redress for breaches of competition law. The proposed safeguards are intended to guard against a shift towards what have been considered to be certain unappealing aspects of US-style class action litigation. As part of this, law firms are expressly excluded from acting as representatives in collective actions, and the prohibition of DBAs and treble damages marks an important difference from the US system.

Notwithstanding this, the opt-out regime will inevitably encourage a significant increase in the number of actions in the CAT, with claimant law firms and litigation funders likely to be acting in the background in support of such claims.

The devil will ultimately be in the detail: many questions remain as to how the CAT will apply its powers to certify collective actions and manage claims that are permitted to be brought. The details of the legislation that will bring these proposals into force will shed further light on the implications of these reforms in due course.

Collective settlements

The Government recognises that an extension of the private actions regime also requires improvements to ADR mechanisms. In this regard, the introduction of a collective settlement regime is to be welcomed.

The Response states that the Government will:

  • strongly encourage ADR, but not make it mandatory;
  • align the CAT’s rules governing formal settlement offers with those of the High Court – a welcome development, in particular, for defendants seeking to enter into binding settlement agreements;
  • introduce a new collective settlement regime, to be operated by the CAT; and
  • enable the UK competition authorities to offer a new voluntary redress settlement scheme to companies which have been found to have infringed competition law, the use of which would entitle participating companies to a reduction in the fine imposed.  

Other points of interest in the response

After assessing the results of the consultation, the Government has also decided that:

  • a rebuttable presumption of loss for cartel cases will not be introduced. The Government acknowledges that such a presumption would contradict the basic principle of English law that it is for claimants to show their loss;
  • the ‘passing-on’ defence in cartel cases, which arises where the claimant has passed on its losses resulting from a cartel overcharge to its own customers, will not be addressed in legislation. The Government acknowledges that, under the existing principles of tort law, there is no reason why the passing-on defence should not be allowed, but that the details of its application are better addressed through judicial case law; and
  • the protection of cartel leniency application materials will not be addressed in legislation at the UK level, as EU legislation is anticipated on this issue later this year. The Government notes that, should the EU process be delayed, national measures to protect leniency materials may, however, be adopted.


If the Government’s proposals set out in the Response are adopted, the changes to the UK’s competition litigation regime will be significant and would mark a radical shift in policy approach, the impact of which may in time be felt beyond the competition field.  If the competition class actions regime is perceived by policy-makers as a success, similar regimes could even be rolled-out in other areas, such as product regulatory or environmental, to facilitate the bringing of group claims by consumers.

The proposals to expand the CAT’s jurisdiction will be widely welcomed given the widely-recognised problems with the CAT’s current limited remit. The introduction of a collective settlement mechanism will be more controversial, with the Confederation of British Industry having been quick to express its reservations on the potential for it to encourage a costly litigation culture. However, the Government has held to its view that the introduction of such a regime, along with the other proposed changes, is needed to enable small businesses and consumers to obtain redress for competition law breaches that cause them loss.  Encouraging litigation in this way, and taking steps to facilitate it, represents a crossing of the Rubicon in policy terms.

A number of important areas, such as the way in which the opt-out collective action regime will work and the impact of the fast-track procedure, are not yet fully clear. Those aspects of the new regime have the potential significantly to increase the volume of litigation brought in the CAT while reducing procedural safeguards for defendants. Some important points of detail, such as the recoverability of ‘no win no fee’ conditional fee arrangement fee uplifts and after-the-event insurance premia from losing parties – which have had a significant impact on claimants’ incentives to bring competition damages claims under the current regime - are still unclear and will need to be thrashed out once the proposals are set before Parliament in draft legislation and implemented in amended CAT rules.

What does already seem clear, however, is that the proposed changes will significantly alter the competition litigation landscape. They appear certain to lead to a higher volume of claims from within the UK, as consumers and SMEs are encouraged to take action against larger market players; and will also make the CAT a magnet for competition litigation from parties elsewhere within Europe. The long-term implications of that for companies exposed to UK jurisdiction may be substantial.