The most significant changes introduced by
this new regime are as follows:
- The CAT can hear collective proceedings and make collective settlement orders.
- A U.S.-style “opt-out” collective claim will be possible for claimants within the UK.
- A collective action can now be brought by someone who “will fairly and adequately act in the interests of class members” rather than just certain specified bodies.
- The current restriction that a CAT collective action must be a ‘consumer claim’ will be removed, allowing businesses to be part of a collective action.
- The CAT can hear stand-alone claims as well as ‘follow-on’ claims.
- The CAT can grant injunctions.
- There is a fast track procedure for smaller claims.
- Limitation will be brought into line with the High Court, with a transitional period.
- The CAT will be able to make an aggregate award of damages rather than having to assess individually the amount of damages recoverable by each class member.
Claimants already have the ability to avoid
the need to prove a breach of competition law by bringing a ‘follow-on’ claim
in the CAT based on an existing finding by the UK or European competition
regulators. The above changes should provide further encouragement to bring
collective actions in this context.
However, the retention of the ‘loser pays’
principle leaves the claimants (or the class representative in collective
actions) liable for the defendant’s costs if the claim is unsuccessful and
could put a brake on claims. The prohibition on exemplary damages and damages
based agreements for collective actions will also have a chilling effect on
claim volumes. Furthermore, significant
uncertainties remain, in particular as to the circumstances in which the CAT
will consider opt-out collective actions to be appropriate, the CAT’s approach
to class certification and how an aggregate award of damages could be
calculated in circumstances where each individual claimant’s loss might vary
For these reasons, it remains to be seen
whether the new regime will bring a flood of class actions, or whether
claimants will wait for the further changes set out in the EU Damages
Directive, which will be implemented in the UK by the end of 2016. This should
improve the position of claimants still further, including by introducing a
rebuttable presumption of harm where there has been a regulatory finding of a
cartel infringement, and giving the court or tribunal the power to estimate
loss where it is excessively difficult to prove the amount of loss.
Basis of claims
Claims can be brought by any person who has
suffered loss or damage, including both consumers and businesses. Claims will
be based on:
- an alleged infringement of competition law (referred to as “stand-alone cases”); or
- a competition law infringement decision of the Competition and Markets Authority (CMA), the CAT (on appeal from the CMA) or the European Commission (referred to as “follow-on cases”).
The relevant competition law infringements
are agreements which prevent, restrict or distort competition within the UK or
the EU, or abuse of a dominant position affecting trade within the UK or
between EU member states.
The CAT regime
Currently, stand-alone cases cannot be
brought in the CAT and must be brought in the High Court. This will change from 1 October 2015, and the
CAT will have jurisdiction to hear stand-alone cases. In follow-on cases
(currently and under the new rules) the CAT is bound by an infringement
decision of the CMA, the CAT or the European Commission once it has become
Follow-on cases are limited to the
infringements found by the regulator, and the CAT then only needs to decide the
issues of causation (which is likely to be critical in many cases) and
quantification of loss. In addition, in both follow-on and stand-alone cases,
the CAT is bound by findings of fact made by the CMA in the course of
conducting an investigation which is relevant to an issue in the proceedings,
unless the CAT directs otherwise. Findings of fact which are directly relevant
to a decision as to infringement are normally regarded as binding, but the CAT
may direct that a peripheral or incidental finding of fact is not binding.
The new procedures
The CRA will come into force on 1 October
2015. The regime created by the CRA will be complemented by new CAT Rules,
including a section dealing with collective proceedings. The new regime expands the jurisdiction of
the CAT significantly.
The CAT now has the power to grant
collective proceedings orders, and to grant collective settlement orders. This is the foundation of the CAT’s new
‘class action’ type jurisdiction.
The CAT will also be empowered to grant
injunctions under the new regime, and a fast track procedure has been
introduced for smaller, simpler claims.
Under the fast track, a claim will be actively case managed through to a
hearing within 6 months of its commencement.
Notably, injunctions in fast track cases will not necessarily require a
cross undertaking in damages. This is
consistent with the legislative aim to make redress for competition claims
quicker, cheaper and easier to obtain for private parties.
Procedure for claims
Collective proceedings are commenced by a
proposed class representative filing a collective proceedings claim form with
the CAT. The claims sought to be included in collective proceedings must “raise the same, similar or related issues of
fact or law” in order for the CAT to make a collective proceedings order.
In addition, they must be “suitable to be brought in collective proceedings”,
which requires the CAT to consider the costs and benefits of continuing the
collective proceedings, the size and nature of the class, whether it is
possible to determine for any person whether they are a member of the class,
and other factors set out in the CAT rules. The collective proceedings can also
combine existing CAT proceedings, with the consent of the claimants in those
The CAT, not the claimants, decides the
description of the class of persons whose claims are eligible for inclusion in
the collective proceedings. Two types of collective proceedings can be brought:
- Opt-in proceedings, on behalf of each class member who opts in by notifying the class representative that their claim should be included in the proceedings; and
- Opt-out proceedings, on behalf of each member of the defined class domiciled in the UK who opts out by notifying the class representative. Class members who are not domiciled in the UK must opt in to be included in the proceedings.
In determining whether the collective
proceedings should be opt-in or opt-out, the CAT will take into account the
strength of the claims and whether it is practicable for there to be opt-in
collective proceedings, having regarding to the estimated amount of damages
that individual class members may recover. Opt-out collective proceedings,
which are a feature of U.S. class actions, were not previously permitted in the
Under the new regime, the limitation rules
have been relaxed, subject to a transitional phase. The previous two-year limitation period for
CAT claims has been brought into line with the High Court. However, for claims arising before 1 October
2015 the previous limitation regime will apply, which will reduce the impact of
the new regime at the outset.
Resolution of claims
A judgment or order given in the collective
proceedings is binding on all parties represented by the class representative.
There is a right of appeal to the Court of Appeal on a point of law. If a claim
is successful, the CAT can make an aggregate award of damages without first
assessing the amount of damages recoverable in respect of each individual class
member. In practice, the method of calculating damages will need to be
considered in the early stages of a case with the assistance of economists
and/or accountants, and this may determine whether opt-out proceedings are
appropriate. Unlike in the U.S., the CAT cannot award exemplary damages or
“treble damages”. Damages-based agreements (where the claimants’ lawyers are
paid a proportion of the damages awarded to the claimants) will be
unenforceable in relation to opt-out collective proceedings. In contrast,
similar arrangements are common in U.S. class actions. The purpose of this rule
was to avoid a “litigation culture” in the UK, provide a safeguard against weak
claims or speculative litigation, and avoid creating an incentive for claimant
lawyers to focus on the largest cases. However, ‘no win, no fee’ conditional
fee agreements and after the event insurance are permitted.
In the U.S., the usual rule that each side
bears its own costs, even if the claim is unsuccessful, removes a significant
disincentive to bringing class actions. However, under the new UK regime, the
usual “loser pays” rule is retained. If a claim is unsuccessful, the claimants
in opt-in proceedings will usually be liable for the defendants’ costs, and the
class representative bears the costs risk.
Collective settlements are possible for both
opt-in and opt-out proceedings. These are subject to approval of the settlement
by the CAT in the case of opt-out proceedings.
EU Damages Directive
The EU Damages Directive (2014/104/EU)
applies to claims relating to infringements of competition law and must be
implemented in the UK by 27 December 2016. The Directive will assist claimants
in collective proceedings in the CAT, and provided that limitation issues do
not arise, potential claimants may choose to wait for the UK implementing
legislation before commencing their claims. In particular, it requires EU
Member States to ensure that a final infringement decision of a national
competition authority or review court of any EU Member State is deemed to be “at least prima facie evidence that an
infringement of competition law has occurred and, as appropriate, may be
assessed along with any other evidence adduced by the parties”.
Further, the Directive provides for a
rebuttable presumption that cartel infringements cause harm, and national
courts must have the power to estimate the amount of harm caused if it is
practically impossible or excessively difficult precisely to quantify the harm
suffered. However, claimants cannot recover compensation to the extent that
they have passed on to their customers any overcharging resulting from the
infringement by the defendant.
Although they have not yet been tested, the
new class action rules will change the litigation landscape for potential
claimants and their lawyers, as well as for defendants. It will be easier for
claimants to bring collective actions for breaches of competition law, share
and minimise their legal fees, and benefit from a successful result or
settlement. Those who have breached competition law can expect an increased
likelihood of a class action being brought against them, with increased
liability arising from opt-out collective proceedings. Firms conducting
internal investigations or being investigated by regulators for breaches of
competition law will also need to consider whether taking a step during the
investigation might harm their position in any future class action.
However, the new rules provide some important controls
in relation to the award of damages and costs which should prevent the rapid
growth of class action litigation, as has occurred in the U.S. Much will depend
on how broadly or narrowly the class is defined, the merits of each claim, and
the risk appetite of defendants either to settle or defend the case to its
conclusion. The CAT’s first few decisions will be vital in shaping the
development of UK class action practices and determining whether claimants will
seek to bring increasingly large and complex cases.