The UK government has announced that it will be going ahead with plans to allow opt-out class actions for breaches of competition law. Canadian companies with connections to the UK could be affected.

Canadian companies domiciled in the UK or with subsidiaries there could be defendants to a collective action. Moreover, the new framework would allow non-UK claimants (whether individuals or businesses) to opt-in to collective actions, giving rise to world-wide classes.

The Proposed Regime

Under the new regime, the UK’s Competition Appeal Tribunal (“CAT”) will have the power to hear collective claims for damages. Claims may be brought by claimants (either consumers or businesses), or by a representative body (such as a trade or consumer association). The proposals include safeguards such as:

  • a certification process;
  • prohibiting exemplary damages or contingency fee arrangements; and
  • maintaining the rule that the unsuccessful party pays the costs of the opposing side.

It is widely accepted that the current system in the UK has prevented legitimate collective actions. Under the current regime, every mechanism of collective redress effectively requires claimants to “opt-in” to the action. The CAT is only able to hear claims that arise following a competition regulator obtaining a court order and only certain entities listed under the Competition Act may bring claims on behalf of consumer groups. Standalone collective actions may be brought by a “group litigation order” or “representative action”, but these mechanisms have not been used extensively.

Practical Implications for Canadian Companies

The proposed changes are not likely to come into force until at least 2015. The proposal should signal to Canadian companies connected to the UK that they will be at an increased risk of defending class actions for anti-competitive practices. The proposals also continue the UK’s sector-by-sector approach to collective action reform, looking at particular industries or economic activities, rather than at creating a general class actions regime.