On October 1, 2015, the main provisions of the Consumer Rights Act 2015 (the Act) came into force, introducing significant changes to the UK regime for private competition law litigation. The Act, which amends the Competition Act 1998 and the Enterprise Act 2002, makes it much easier for claimants to obtain compensation in the UK for losses suffered as a result of someone else’s infringement of competition law. The changes are likely to result in a significant increase in claims for alleged competition law breaches.
While the European Commission and the Competition and Markets Authority (CMA) have powers to investigate and potentially fine entities for breaches of competition law (for example, for abusing a dominant position or participating in a cartel), they cannot order infringers to pay compensation to those who have suffered as a result of that breach (such as consumers or other businesses). Instead, those who have suffered as a result of the breach must issue a claim in the regular Courts or the specialist Competition Appeal Tribunal (CAT). The competition reforms introduced under the Act are largely intended to encourage those who have suffered as a result of a breach of competition law to bring more private litigation. The most significant reforms are discussed below.
1. Introduction of a limited “opt-out” collective action regime
Perhaps the most significant change is the introduction of a mechanism allowing claimants to bring “opt-out” collective actions before the CAT (although, individuals and business domiciled outside of the UK must still “opt-in” to be bound by those proceedings). While prior to October 1, 2015, claimants were able to bring collective proceedings before the CAT on behalf of other claimants who had actively decided to be part of the litigation (i.e., “opted-in”), the reforms enable a claimant to bring claims on behalf of a class of claimants who do not need to take any steps in, or have any knowledge of, the litigation in order to be represented. Accordingly, the reforms make it easier for claimants to bring large-scale claims for compensation on behalf of others (for example, where an individual’s own loss is not significant enough to merit bringing an action individually). Although there are certain safeguards, this new mechanism is more similar to U.S. style class actions, which to date have not been a feature of civil litigation in England. As such, the introduction of “opt-out” class actions constitutes a fundamental change to the litigation landscape and amplifies both the liability risk for businesses, as well as the litigation opportunities for would-be claimants.
2. Increased powers to the CAT to hear private actions for breaches of competition law
A claimant who has a claim for a potential breach of competition law can bring its claim in the UK either before the CAT or the regular Courts. Among the reforms which came into force on October 1, 2015, are procedural changes bringing certain of the CAT’s powers in line with those of the English High Court which, when combined with the specific competition knowledge of CAT judges, are likely to make the CAT more attractive to potential claimants as a forum for resolving competition law disputes. These changes apply both to “opt-in” and “opt-out” proceedings.
The most significant of these changes include:
- Prior to October 1, 2015, claimants could only bring “follow-on” actions before the CAT (i.e., where the CMA or European Commission had already established that the defendant had breached competition law). Following the recent reforms, it is now also possible for claimants to bring “stand-alone” actions (i.e., where the claimant is required to prove that the defendant has breached competition law). Previously, “stand-alone” claims could only be brought before the regular Courts.
- The CAT is now able to grant an injunction as a remedy, and the injunction will have the same effect and enforceability as if it had been granted by the English High Court.
- The limitation period in which a claim can be brought before the CAT has been extended from two years to six years, mirroring that for claims before the English High Court.
- A fast track procedure has been created for certain types of claims before the CAT.
3. Voluntary Redress Schemes
The Act also introduces regulator-approved voluntary redress schemes. The Act amends the Competition Act 1998 so that a business which has received or expects to receive a decision by the CMA or European Commission that it has infringed competition law can now apply for regulator approval of a redress scheme offering compensation to those businesses and consumers who have suffered as a result of its infringement. The measures are designed to encourage the voluntary resolution of competition disputes outside of litigation by providing businesses which have infringed competition law with a quick and cost-effective way of offering and administering compensation. As an encouragement, where a redress scheme is proposed in relation to a potential infringement decision, the CMA has the discretionary power to reduce the penalty for the infringement by up to 20 percent.
While the full impact on private competition litigation remains to be seen, the reforms should make it easier for claimants to bring actions in respect of alleged and proven breaches of competition law. This is likely to result in a significant increase in “stand-alone” and “follow-on” actions by private parties claiming damages as a result of anti-competitive activity. The introduction of “opt-out” collective actions may also lead to higher damages awards as classes represented, and therefore to be compensated, become larger.
When assessing potential exposure under relevant competition laws, businesses will need to take account of this increased risk of private damages actions, alongside the continuing powers of the European Commission and CMA to impose fines. Potential claimants who have suffered damage as a result of anti-competitive activity now have more options to seek redress and will need to assess the best strategy to follow.