The new English "opt-out" collective action and settlement mechanism for competition law claims comes into force on 1 October 2015 and opens the door to a wave of competition damage litigation in England & Wales.
The procedural rules that will govern collective claims and settlements before the Competition Appeal Tribunal (the "CAT") were published on 8 September 2015 following a consultation and also come into force on 1 October 2015. The rules can be found at http://www.legislation.gov.uk/uksi/2015/1648/made
The rules provide that the CAT is empowered to order that two or more claims may be combined into a collective action where:
- the party who brought the proceedings is a party whom the CAT could authorise to act as a representative (the representative need not be a claimant provided that the CAT considers it "just and reasonable" for that party to be approved to act); and
- the claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings.
It remains to be seen whether the CAT will apply a high, medium or low threshold in interpreting these criteria. It is likely that there will be a degree of debate in early cases on the appropriate standards to apply and whether guidance can be drawn on the factors to be considered from other jurisdictions with established collective action regimes such as the US and Canada.
The opt-out provisions contained in Schedule 8 of the Consumer Rights Act 2015 apply only to UK domiciled claimants, with non-UK domiciled claimants able to opt in to collective actions. Unsuccessful defendants will have to pay damages calculated on an aggregate basis in respect of all the potential claimants in the class of claimants defined in the collective proceedings order - not only those identified claimants who actively pursue an action for damages. Any undistributed sums will be paid to charity or - although damage based costs agreements are not permitted in this context - the CAT retains a discretion to order that all or part of any unclaimed damages may be paid to the class representative in respect of costs incurred in connection with the proceedings.
The CAT may also make an order to approve proposed collective settlements if it is satisfied that the terms are just and reasonable. Such orders will be binding on all potential claimants falling within the class of persons on behalf of whom the claim has been brought, unless they have opted out, and on all non-UK domiciled claimants who have opted in to the collective action. It is worth noting in this context that a settlement offer made by a defendant in collective proceedings and rejected by the representative will not automatically have costs consequences if the outcome of the case is more favourable to the defendant than the offer. However, the CAT does have the power to take into account "without prejudice save as to costs" offers when assessing the burden each party should bear in respect of costs.
The changes implemented by Schedule 8 of the Consumer Rights Act 2015 mean that it will also now be possible to bring both stand alone and follow on claims in the CAT. This means that claimants do not necessarily need to wait until after a regulatory body has issued a finding that an infringement of competition law has occurred before instigating an action in the CAT. Similar provisions in the US have seen claimants proceeding to file class complaints soon after the fact of a regulatory investigation has been announced - placing defendants under pressure on multiple fronts.
It will be interesting to see how the new collective actions regime develops over time and the way in which questions like funding, authorisation of class and approval of class representatives will play out in practice. It is expected that the new legislation will facilitate claims for both companies and consumers - making England & Wales one of the more "claimant friendly" EU jurisdictions for those considering whether to issue competition damage proceedings.