New “opt-out” class action for competition claims

As part of a major overhaul of the competition litigation regime in the UK, a new collective redress regime for competition claims will be introduced from 1 October 2015. It will allow collective proceedings to be brought in the Competition Appeal Tribunal (“CAT”) on behalf of a class (whether consumer or business) in both follow-on and stand-alone cases.

Crucially, under the new regime, claims can be brought on either an opt-in or an opt-out basis, subject to certification by the CAT. In opt-out cases the claim can be brought on behalf of a defined group, and aggregate damages awarded to the group, without the need to identify all the individual claimants and specify their losses. Claimants within a class are automatically included in an action unless they take specific steps to opt-out. The opt-out aspect will only apply to UK domiciled claimants, but non-UK claimants will be able to opt in to the claim.

Under the new regime, either a class member or a third party representative can bring a collective action, provided the CAT authorises it to do so. The Government had announced an intention to exclude (or at least include a presumption in favour of excluding) law firms, funders and Special Purpose Vehicles from acting as representative, but ultimately did not include such an outright prohibition in either the legislation or the CAT rules.

The CAT will be able to make a damages award without assessing quantum for each class member. Unlike in the US, there is no equivalent to treble damages, and no exemplary damages can be awarded in collective proceedings. This is intended to safeguard against unmeritorious claims. Controversially, however, in opt-out cases, unclaimed damages will be paid to a prescribed charity (currently the Access to Justice Foundation) rather than reverting to the defendant.

It is also worth noting that the new regime will apply to causes of action arising before commencement, and therefore collective actions may be brought in relation to cartels and other competition law infringements which have already been identified and sanctioned by the UK and EU competition authorities (or indeed to unsanctioned conduct if the claimant can prove liability). Companies which have been subject to an infringement decision or which are currently under investigation should therefore consider the risks of a collective action being brought against them and start to formulate a defence strategy.

To read a more detailed briefing from our competition litigation team please click here.

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