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.
Over the next few weeks we will be delivering a number of disputes-related webinars for Herbert Smith Freehills clients and contacts, including on: what to do when you’ve been given notice of a freezing order; the increasing risk of class actions in the UK; and how to know when you have a binding contract.
In relation to freezing orders, on Tuesday 9 June Robert Hunter will consider a string of decisions in recent years which have clarified much of the uncertainty as to what freezing orders actually prohibit, and will offer practical advice to those who want to know what they can do after being served with a freezing order.
In relation to class actions, on Thursday 18 June Kim Dietzel, Damian Grave, Kirsten Massey, Maura McIntosh, John Ogilvie and Gregg Rowan will look at a number of current developments which, taken together, increase the potential for large group actions to be brought in this jurisdiction, including competition law claims, securities claims, and claims arising out of human rights and environmental issues, and will consider what businesses can do to manage or mitigate the risks.
In relation to contracts, on Monday 22 June Tim Parkes, Chris Bushell and Robert Moore will look at the requirements for a binding contract and the problems that can arise when what appears to be an agreement is not in fact binding, or vice versa, and look at some practical steps that can be taken to minimise the risks.
All of the webinars are 12.45 – 1.45pm BST. They are part of our series of “Soundbite” webinars, which are designed to update clients and contacts on the latest developments without having to leave their desks. The webinars can be accessed “live”, with a facility to send in questions by e-mail, or can be downloaded as podcasts after the event. If you would like to register for a webinar, or to obtain a link to the archived version, please contact Jane Webber. The webinars, both live and archived, also qualify for one CPD point.
The Consumer Rights Act received Royal Assent yesterday, 26 March, and is expected to come into force on 1 October 2015. The Act will make it easier for private parties, in particular SMEs and consumers, to bring damages actions for breach of competition law.
The Act introduces a new “opt-out” collective action in the Competition Appeal Tribunal (CAT), so that claims can be brought on behalf of a defined group without the need to identify all the individual claimants. The opt-out aspect will only apply to UK domiciled claimants, but non-UK claimants will be able to opt in to the claim if they wish to participate.
The regime incorporates a number of safeguards in order to avoid frivolous or unmeritorious litigation, including a preliminary merits test and a requirement for the CAT to consider whether the claim should proceed on an opt-in or opt-out basis. There will be no treble damages (as is the case in the US) and any unclaimed damages will have to be paid to the charity prescribed by order by the Lord Chancellor.
The Act also introduces a new opt-out collective settlement regime to allow businesses to settle cases quickly and easily, as well as voluntary redress schemes under which companies found to have infringed UK or EU competition rules voluntarily agree to pay compensation to those harmed by their infringement. For more information please see our competition, regulation and trade e-bulletin here.
On Thursday 23 January the government introduced the Consumer Rights Bill to Parliament. The Bill includes proposals for a new collective action for competition claims, together with other proposals for reforming the UK regime for competition law private actions. This follows initial publication of the government’s proposals in January 2013 (see post) and the draft Bill in June 2013.
If passed by Parliament, the Bill will create a new “opt-out” collective action for competition law claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT). The CAT will be required to certify whether an action should proceed on an opt-in or (for UK-domiciled claimants) opt-out basis. With an opt-in action, as the name suggests, claimants need to opt in if they wish to benefit from the claim. In contrast, with an opt-out action, the claim is brought on behalf of a defined group, without the need to identify individual group members; all those who fall within the group will be bound by the result (including a settlement) unless they opt out of the case.
In terms of who will be able to act as a representative to bring an opt-out collective action, this includes any claimants (individuals or businesses) who have suffered a loss, as well as genuinely representative bodies such as trade associations. However, a person may only be authorised to act as a representative in proceedings if the CAT considers it “just and reasonable” for that person to do so – even if they are a class member. In the draft Bill the “just and reasonable” requirement applied only if the proposed representative was not a class member.
The Bill also includes a new opt-out collective settlement regime, similar to the Dutch mass settlements regime. This will allow parties to ask the CAT to approve an agreed settlement on an opt-out basis (for UK-domiciled claimants) without the need for a claim to be brought.
The government’s draft Consumer Rights Bill, published today, includes proposals for a new collective action for competition claims, together with other proposals for reforming the UK regime for competition law private actions. The draft legislation follows proposals published by the government in January this year (see post).
The draft Bill will be considered by Parliament as part of the pre-legislative scrutiny process. The government’s policy paper states that, although its policy position on competition law private actions was published in January this year, it is “aware of strong and different views of stakeholders about the effectiveness and impact of these proposals”. It therefore particularly welcomes comments and views on this element of the draft Bill “to help inform a final position and ensure the outcome is as effective as possible”. Comments are requested by 13 September 2013.
The European Commission has today published its long-awaited proposals for the future of collective actions in the EU. The proposals take the form of a non-binding Commission Recommendation together with a Communication explaining the background (click here for links to the documents).
The Recommendation invites Member States to adopt collective redress mechanisms at national level for both injunctive and compensatory relief for breaches of EU law rights which follow a set of basic principles set out in the Recommendation. The Recommendation takes a horizontal approach, rather than proposing different mechanisms for different sectors. Importantly, it recommends an “opt-in” system, with group members having to be identified before a claim is brought. Any exceptions to this principle should be “duly justified by reasons of sound administration of justice”.
The proposals follow the Commission’s public consultation on collective redress in February 2011 (see post) and the European Parliament’s resolution in response in February 2012 (see post).
The proposals in the Recommendation overlap to a large extent with UK proposals for a new collective action for competition claims, expected to be introduced in the forthcoming Consumer Rights Bill. The UK proposals go further than the Commission Recommendation, in particular in proposing (controversially) the creation of an “opt-out” mechanism for competition claims (see post).
Other key features of the Recommendation include: Continue reading
The government has today published its plans for reforming the UK regime for competition law private actions, including the creation of a new "opt-out" collective action for competition law claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT). This proposal has been highly controversial due to concerns that it may lead to some of the "excesses" of US-style antitrust litigation (see our post on the government's consultation last April).
Under an opt-out regime claims can be brought on behalf of a defined group and damages awarded to that group, without the need to identify individual group members; all those who fall within the group will be bound by the result (including a settlement) unless they actively opt out of the case. This is a significant departure from existing procedures for pursuing multi-party litigation in this jurisdiction. Under the government's proposals, the CAT will be required to certify whether an action should proceed on an opt-in or opt-out basis. The opt-out aspect will apply only to UK-domiciled claimants; those domiciled outside the UK will need to opt in if they wish to participate in the litigation.
One aspect of the government's plans that is likely to be particularly unpopular with defendants is that any damages remaining unclaimed will be paid to the Access to Justice Foundation rather than reverting to the defendant. Accordingly, the damages that defendants will have to pay will be based on losses suffered by the entire class, not only those who come forward to claim their damages. Parties will however be free to agree a settlement on a different basis, subject to approval from the CAT.
The government is also proposing a new opt-out collective settlement regime for competition cases, whereby parties could ask the CAT to approve an agreed settlement on an opt-out basis (for UK-domiciled claimants) without the need for a claim to be brought. This is similar to the Dutch mass settlements regime, save that the Dutch system purports to cover claimants domiciled outside the Netherlands (including potentially UK-based claimants). There will also be new powers for the Office of Fair Trading (OFT), and in due course its successor the Competition and Markets Authority (CMA), to certify voluntary redress schemes.
The government's announcement follows an update on the proposals given by Jo Swinson MP (Minister for Employment & Consumer Affairs, responsible for the reforms) at a breakfast seminar hosted by the CBI and Herbert Smith Freehills on 24 January, "Class actions in competition cases coming to the UK?", at which the proposals were debated by the Minister and a panel of speakers from the CBI, Which? and Herbert Smith Freehills.
It is clear that the government's reforms will lead to a significant rise in private competition law litigation in the UK. Click here for more detail on the reforms from our competition disputes group.
At this time of year it is traditional to look back over the past 12 months and try to sum up what the year has had to offer. We thought it might be helpful to do the same from a litigator's perspective, and so we have set out below an outline of some of the key developments from 2012 on topics of interest to litigators.
So whether you've been following developments closely throughout the year and just want a quick refresher, or you're a year behind and need help catching up, we hope there will be something of interest for you below. Continue reading
Class action reform has for some time been a hot topic both in the UK and in Europe, with recent government proposals for a new “opt-out” collective action for competition claims before the Competition Appeal Tribunal (see post) and ongoing debate over the possibility of Europe-wide reform (see post). Hong Kong has also moved closer to introducing a new class actions regime following publication of a Report on Class Actions by its Law Reform Commission on 28 May 2012. The report recommends the introduction of a new class action procedure on an incremental basis, initially only for “consumer cases” – tort and contract claims by consumers in relation to goods, services, and property – but it is expected that the procedure will eventually apply to all claims.
Significantly, the report recommends the adoption of an “opt-out” approach for domestic class actions, pursuant to which all class members would be bound by the litigation unless they had opted out. Such an approach generally results in larger classes, and correspondingly higher value claims, than a procedure which requires potential claimants to make a positive decision to opt in to proceedings. For more information see our Hong Kong litigation e-bulletin.
On Tuesday (24 April) the government published its anticipated consultation on competition law private actions, including radical proposals for a new “opt-out” collective action for competition claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT).
Under an opt-out regime claims can be brought on behalf of a defined group, without the need to identify individual group members; all those who fall within the group will be bound by the result unless they actively opt out of the case. This is a significant departure from existing procedures for multi-party litigation in England and Wales, which generally require potential claimants to make a positive decision to opt in to the proceedings. (The one exception, for representative actions under Civil Procedure Rule (CPR) 19.6, is not widely used due to the strict test that applies, as confirmed by the Court of Appeal in the Emerald Supplies case – see post.) Continue reading