Competition Tribunal: Class Action Claims?

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Posted in:Corporate and Commercial|October 5, 2015 | Join the mailing list

The EU has heavily criticised the UK government for not doing enough to facilitate the use of competition law actions. In the US “anti-trust” actions are endemic. Anti-trust
is simply a word for anti-competitive actions.

Following many reviews of the 2008 economic and banking collapse the government was introducing a large raft of consumer protection rules which ultimately became the Consumer
Rights Act 2015.  This law codified a number of areas that were seen as being conducive to ensuring consumers could utilise the new digital age facilities and still be protected, as well as tightening up other areas.

As part of this legislation the government introduced section 81 of the Act which states:

81 Private actions in competition law

Schedule 8 (private actions in competition law) has effect.

This section brings into law Schedule 8 of the Act.  This creates a Competition Tribunal and with it some substantial legal changes.  They came into force (i.e. became
effective) on 1 October 2015.  Media comment suggests that this brings to the UK the US style class actions. Whilst strictly true, it should be remembered that these “class actions” are only available for competition law breaches, unlike the US where class
actions are brought for much wider issues.

Schedule 8 amends the Competition Act 1988.

The Competition Tribunal rights are not restricted to “consumers”.  It is available to any person or business that has a claim. 

The Competition Tribunal allows individuals to issue a claim, for groups of people to bring a claim and creates an “opt in” and “opt out” redress scheme. The opt-out redress
scheme is possibly the biggest change.

Claims through the Competition Tribunal do not preclude a person from also seeking a claim elsewhere. That provides new rights to consumers and SMEs. The Tribunal can also
issue injunctions where necessary.

The most important changes are as follows:

Damages. In court proceedings there is a fundamental requirement to evidence how losses and damage has
arisen from the legal wrong committed and to provide supportive calculations. The Competition Tribunal in the class actions can actually determine losses and direct how redress is to be calculated. The need to meet the court test for showing recoverable losses
has discouraged many potential claimants previously, and this change will facilitate the bringing of claims that come into this category. For example, the lack of readily available data as to LIBOR manipulation renders onerous the proving of loss.  A class
action changes that, as the Tribunal can determine liability (e.g. if the actions complained of do amount to an anti-competitive practice) before ordering the defendant(s) to calculate redress. This significantly increases the scope of potential claims where
in the context of a court claim one would firstly have to show loss as a prerequisite of bringing an action.

Redress Schemes: Any “representative” can apply to the Competition And Markets Authority for the right
to create and pursue a redress scheme. This is an important and unprecedented means of empowerment for consumers shifting the sole ability to implement a consumer redress scheme from Governmental agencies to those having most obvious standing to bring claims
as those directly affected.

Opt-Out.  The Competition Tribunal can make an order that a class action is opt-out. That means that
every person/entity that ought to receive damages is automatically included, even if they do not know about it. This is intended to allow a UK based representative to sue where damages could also be owed to non-UK based entities. So, for instance, if a relevant
ruling was made in the US by a regulatory body that conduct amounted to anti-trust conduct a representative in the UK could ask the Tribunal to determine cases for people resident in Europe (for instance) who would not normally have standing being resident
outside of the UK where the anti-competitive practices could be shown to have taken place. Every class of person would automatically be put into the scheme, even if they knew nothing of it. They would have the ability to opt out of it. This is seen as being
far reaching and a departure from the principle that defendants are answerable to only those claimants who actually bring a claim. If damages are paid and claimants cannot be traced, the damages must be paid to charity. Is that fair?

Opt-in: this is the type of class action that is well known. A representative would ask the Tribunal
to certify a class of people, as a hypothetical example, “all SME customers of A&B Bank Plc”. After the certification every person wishing to bring a claim could, if they so choose, opt to join this class action. The obvious benefits flowing from
this would be saving costs and speeding up the process. Costs and efficiencies are one of the drivers behind the new rules.

The UK has only ever had a Competition Appeal Tribunal. As such, the costs implications of class actions need to be determined when the Competition Tribunal rules are issued. 

The FCA has now issued its guidance on its use of its new competition powers, and the first ruling by the FCA on a competition issue will be in connection with Foreign
exchange manipulation issues. How the Competition Tribunal works will likely be seen in the near future because the first decision the FCA hands down will be its report into FX manipulation and competition breaches. 

For SMEs these new rules are likely to allow for greater powers when dealing with multi-nationals who have previously always had a greater power in negotiations. Any large
business that works in an area that is subject to competition and competition rules will be reading Schedule 8 with much discomfort as to what lies ahead.

If there are any issues in this update or more generally that you would like to discuss, please contact one of our team on 0161 829 2599.

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this article.)

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