Collective or Class Actions and Claims Aggregation in the United Kingdom

Introduction

The United Kingdom has long been a forum of choice for private enforcement of competition law, collectively or otherwise,^[2] and claimants seeking to bring collective actions (that is joint claims by parties that are not related) in the United Kingdom^[3] have had a number of possible procedural routes available to them. Where a number of unrelated claimants have similar claims, the possible routes for collective action range from: ‘informal’ claims aggregation (by simply naming multiple claimants on a standard claim form) and joint case management of similar cases; through to more formal routes such as representative actions, group litigation orders (GLOs) pursuant to Part 19 of the Civil Procedure Rules (CPR) and the competition-specific collective proceedings regime set out in the Competition Act 1998 (as amended by the Consumer Rights Act 2015).

Before 2003, in cases involving large numbers of claimants who had each suffered a relatively small loss as a result of a competition law breach, the more formal routes of representative actions and GLOs were considered unsuitable or unpopular in practice.^[4] To address this, a specific method for collective redress for damage caused by competition law breaches was first introduced in 2003. Initially, the regime allowed a consumer representative organisation designated by the Secretary of State to bring ‘follow-on’^[5] damages claims in competition cases on behalf of consumers (on an ‘opt-in’ basis^[6] only). However, just one case was brought under this very narrow regime (the case settled, with costs understood to have far outweighed the ultimate settlement). In October 2015, the scope of the competition collective actions regime was dramatically expanded by the Consumer Rights Act 2015. The expanded regime allows collective claims to be brought by businesses as well as consumers, in stand-alone^[7] as well as follow-on cases, and – following much debate – on an ‘opt-out’ basis^[8] as well as an ‘opt-in’ basis. The regime thus heralds a step-change in collective enforcement of competition law in the UK.

At the time of writing, 13 applications for a collective proceedings order (CPO) have been made to the Competition Appeal Tribunal (CAT) under the expanded regime. On 18 August 2021, the CAT approved the first application for a CPO under the competition class action regime introduced in 2015, in Walter Hugh Merricks CBE v Mastercard Incorporated and others.^[9] The application was initially turned down by the CAT in 2017 but was remitted to it following a series of appeals, to be reconsidered against the principles set out by the Supreme Court in its ruling of 11 December 2020 (discussed in more detail below). The Supreme Court’s landmark ruling in Merricks v Mastercard^[10] has clarified important aspects of the legal framework governing CPO applications and takes a more permissive approach to certification than had initially been suggested in the CAT’s initial certification judgments. As a result, the Supreme Court’s judgment may lead to more class actions being brought, and it has unlocked a number of potential claims that had been stayed pending the Supreme Court’s judgment. There are now a further 11 CPO applications before the CAT, several of which were recently heard and are awaiting certification decisions over the coming months.

This chapter considers the current trends in collective or class actions and claims aggregation in the UK, and highlights some of the key issues that have arisen in recent cases. While much of the focus is on the expanded opt-out collective actions regime before the CAT, it also considers trends and key issues arising in claims brought by multiple claimants via the other routes mentioned above, namely representative actions, GLOs, and informal claims aggregation and joint case management before both the High Court and the CAT.^[11] Finally, this chapter briefly touches on the issue of settlement, which has its own dynamics in the context of collective claims, whichever of the procedural routes is originally followed when bringing the claim.

Competition collective actions before the CAT

Overview

A competition law-specific collective procedure was first introduced in the UK with effect from 20 June 2003, by way of the former Section 47B of the Competition Act 1998 (CA98).^[12] This allowed bodies designated by the Secretary of State to bring follow-on competition law claims on behalf of consumers in the specialist CAT, on an opt-in basis. However, between 2003 and 2015, this procedure was used only once, in a claim brought by the Consumers’ Association, Which?, in relation to overcharging for football shirts.^[13] In that case, only 130 claimants opted in, which was less than 1 per cent of those estimated to have been affected by the competition infringement in question, and the case ultimately settled. Which? – the sole body then designated to bring claims on behalf of consumers – indicated that it would not bring another claim so long as the mechanism remained opt-in in nature,^[14] and the procedure was widely perceived as a failure.

A new lease of life was given by the Consumer Rights Act 2015, as part of a far-reaching overhaul of the competition law private actions regime in the UK. With effect from 1 October 2015, Section 47B CA98 was amended^[15] to be much broader in scope: collective claims can now be brought by businesses as well as consumers, in stand-alone as well as follow-on cases, and – most significantly – on an opt-out basis as well as an opt-in basis. The class representative is no longer limited to designated organisations; it can be either a class member or a representative individual or body, subject to authorisation from the CAT.

The gateway to bringing collective proceedings pursuant to Section 47B is an application to the CAT for a CPO. The CAT must then review the application and decide whether to certify the claim and allow it to proceed. Section 47B CA98 together with Rules 78 and 79 of the CAT Rules 2015^[16] set out the procedural regime for the granting of a CPO. The high-level requirements are that:

• the claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings;^[17] and
• the CAT considers that it is just and reasonable for the proposed class representative to act as the representative in the proceedings.^[18]

The new regime got off to a slow start: in the first year, there were only two CPO applications, and both were effectively rejected by the CAT at the certification stage.^[19] However, there are signs of increasing momentum within the new regime, with 11 further CPO applications having been lodged since May 2018, all bar one of which are seeking certification on an opt-out basis.^[20]

Moreover, the CAT’s rejection of the second CPO application, in Merricks v. Mastercard,^[21] was overturned on appeal by the Court of Appeal and on a further appeal by the Supreme Court, which confirmed the less restrictive approach taken by the Court of Appeal to the question of certification. In its ruling of 11 December 2020,^[22] the Supreme Court acknowledged the CAT’s important role as the ‘expert gatekeeper’, with a wide discretion to decide whether a competition collective action should be certified to proceed, but considered that the CAT had made errors of law when refusing to certify the claim in this case. Following the Supreme Court’s ruling the CAT had been expected to certify the claim on remittal, based on the principles set out by the Supreme Court. In its ruling of 18 August 2021^[23] the CAT decided that Mr Merricks should be authorised as the class representative and that the CAT will make a CPO on an opt-out basis, provided that a suitable undertaking as to liability for costs is given by the funder in case an award of costs were to be made in favour of Mastercard.

Since the Supreme Court’s ruling in Merricks there have, at the time of writing, been four applications for CPOs registered with the CAT (Justin le Patourel v BT Group PLC, Consumers’ Association v Qualcomm Incorporated, Dr Rachel Kent v Apple Inc. and Apple Distribution International Ltd and David Courtney Boyle & Edward John Vermeer v Govia Thameslink Railway Limited & Others). A further claim is being brought by Liz Coll, former head at Consumers International, on behalf of 19.5 million UK Android phone users against Google, for restricting consumer access to other app distributors by pre-installing Google’s proprietary apps including the Google Play Store and charging a 30 per cent commission on every digital purchase.

The claim has been announced in the press but was at the time of writing not yet published on the CAT’s register.

Against that background, this section highlights the key issues and trends from the CPO applications made to date. We touch on the types of cases in which CPOs have been sought, the approach taken by the CAT, the Court of Appeal and the Supreme Court to the eligibility of the claims for inclusion in collective proceedings, and the suitability of the proposed class representative. We also briefly consider the extent of the right of appeal against CAT decisions on the issue of certification.

Types of cases in which CPO applications have been made

The 13 CPO applications that have been made to date suggest that this mechanism will – as intended at the time of its introduction – be used in a broad range of cases, involving both consumer and business claimants covering a range of alleged competition law infringements and on both a stand-alone and follow-on basis.

All but one of the CPO applications made to the CAT so far have sought certification to proceed on an opt-out basis.^[24] This is unsurprising, and it is expected that this trend will continue, particularly for claims where the loss suffered by each individual claimant is relatively small, and the costs of bringing the action are being covered either partly or wholly by third-party litigation funding.

Another unsurprising trend is that the majority of cases have involved (although they may not be limited to) follow-on claims, namely, they are based on an underlying infringement decision by the UK or EU competition authorities. In follow-on claims, there is no need to prove the existence of the infringement; instead, the claimant only has to show that the infringement caused them loss and the amount of that loss. However, it is notable that a number of CPO applications have also been made on a stand-alone basis, including applications in respect of alleged illegal overcharges paid by millions of rail passengers for rail travel to or from the outer boundaries of Transport for London’s fare zones,^[25] an application in respect of alleged leverage of a dominant position in the supply of LTE chipsets with the alleged result that smartphone manufacturers paid supra-competitive royalties for patents^[26] as well as the claims against Apple^[27] and Google^[28] for alleged overcharging by imposing a 30 per cent commission on digital purchases in the Apple App Store and Google Play Store. These cases are also some of the first CPO applications to involve an alleged abuse of dominance and not an infringement of the prohibition on anticompetitive agreements.^[29]

The claims brought to date have involved a roughly equal split between claims brought on behalf of consumers and those brought on behalf of businesses.^[30] With regard to business claims, it is notable that these involve potentially large businesses as well as smaller businesses: for example, in the notice of application published in respect of the opt-out action lodged by Michael O’Higgins FX Class Representative Ltd in July 2019 in respect of the European Commission’s Forex infringement decisions,^[31] the proposed definition of the class of claimants is stated to be ‘intended to capture all the varieties of “main customers” of FX traders referred to in the Commission’s press release of 16 May 2019, namely ‘asset managers, pension funds, hedge funds, major companies and other banks’. The second CPO application brought in relation to the Forex infringements by Mr Phillip Evans also includes a near-identical description of the types of businesses intended to be captured within the claimant classes.^[32] That said, larger companies may of course choose to actively opt-out of any collective action and bring their claims directly (either individually or jointly with a smaller number of other similarly affected companies). The ongoing litigation following on from the Trucks and Forex infringements provides a good illustration of this in practice: in addition to the pending CPO applications, a number of larger companies have already initiated follow-on claims separately, both before the CAT and in the High Court (see further the section below on ‘informal’ claims aggregation).

Eligibility of claims

For claims to be eligible for inclusion in collective proceedings, the CAT has to consider that: they raise the same, similar or related issues of fact or law (often referred to as ‘the commonality requirement’); and they are suitable to be brought in collective proceedings (often referred to as ‘the suitability requirement’). In determining the question of suitability, Rule 79 of the CAT Rules 2015 provides that the CAT may take into account all matters it thinks fit and sets out a non-exhaustive list of potentially relevant factors. These include the size and nature of the class, whether it is possible to determine in respect of any person whether that person is or is not a member of the class, whether the claims are suitable for an aggregate award of damages, and the costs and benefits of continuing the collective proceedings.

This section focuses in particular on the two cases in which certification hearings have taken place and judgments have been given: Gibson v. Pride^[33] and Merricks v. Mastercard.^[34] By way of brief summary of the factual background and context for those cases:

• Gibson v. Pride involved an opt-out claim for approximately £3 million brought by Ms Gibson, the General Secretary of the National Pensioners Convention (NPC), against a manufacturer and supplier of mobility scooters, on behalf of approximately 30,000 UK purchasers between 1 February 2010 and 29 February 2012. The claim followed on from a decision by the UK Competition and Markets Authority that found that Pride Mobility Products Ltd and eight retailers had infringed competition law by entering into agreements and concerted practices aimed at prohibiting the online advertising of prices for certain models of Pride mobility scooters below Pride’s recommended retail prices (i.e., a form of resale price maintenance). The essence of the claim was that class members had overpaid for mobility scooters as a result of the infringement.
• Merricks v. Mastercard involves an opt-out claim for £14 billion brought by Mr Merricks (the former Chief Ombudsman of the Financial Ombudsman Service) against Mastercard, on behalf of approximately 46 million customers who purchased goods and services from businesses in the UK that accepted Mastercard payment cards between May 1992 and June 2008 (even if the purchase in question was not actually made using a Mastercard). The claim (purportedly)^[35] follows on from the European Commission’s infringement decision relating to multilateral interchange fees (MIFs) (fees charged between banks in relation to transactions involving the use of a Mastercard card). The essence of the claim is that the MIF overcharge was passed on to consumers in the form of higher prices for goods and services.

The commonality and suitability requirements

The requirement of commonality of issues between all of the claims has so far proven to be a major stumbling block in CPO applications heard by the CAT. While the CAT has indicated that it does not require all significant issues to be deemed common issues for a claim to be suitable for a CPO,^[36] or for the common issues to predominate over the individual issues, there must still be sufficient commonality to enable the CAT to conclude that the claim is suitable to be brought in collective proceedings. A lack of such commonality was the fundamental reason that the CAT rejected the CPO applications in Gibson v. Pride and in the 2017 Merricks v. Mastercard decision.

Difficult questions have arisen as to whether the loss suffered by the claimants can be treated as a ‘common issue’ and established on a class-wide basis, and the degree of precision with which a CPO applicant must be able, at the time of the certification hearing, to calculate a fair approximation of that loss. Establishing sufficient commonality in this regard will generally require the involvement of economic experts to propose a methodology for calculating loss, and this becomes additionally complex where the extent to which an overcharge has been ‘passed on’ to the claimants is also a contested issue.

In Gibson v. Pride, the proposed claimant class included purchasers of any new Pride mobility scooter during the specified period, including both models subject to the online price advertising restrictions identified in the underlying infringement decision and other models, and models purchased in physical stores as well as online (such that four sub-classes of claimant were identified in the CPO application). Ms Gibson argued that a fair approximation of the estimated individual loss on a common basis within the sub-classes of claimants could be calculated, and relied on an expert economist report setting out a proposed methodology for doing so. However, that methodology did not distinguish between the eight retailers identified in the underlying infringement decision and other retailers of Pride mobility scooters. The CAT considered that this was incorrect, given that the claim had been framed solely as a follow-on claim,^[37] and as such was limited to the boundaries of the infringement identified in the underlying Office of Fair Trading decision. The alleged losses suffered by the members of the proposed claimant class were so diverse (and, in some cases, outside the scope of the infringement decision from which the claim arose) that the CAT concluded that there was insufficient commonality of issues between each of the individual claims to certify the claim to proceed by way of collective proceedings. The CAT invited Ms Gibson to reformulate her claim and amend the proposed methodology to focus on the effects of the agreements that were the subject of the underlying infringement decision, but the claim was ultimately withdrawn.

In Merricks v. Mastercard, demonstrating commonality of interest between the claims proved problematic before the CAT largely due to difficulties in determining how much of the alleged overcharge had been passed on to each proposed claimant by the relevant retailers: in practice, there was likely to be significant variation in pass-on of the alleged overcharge between different kinds of goods and services and different kinds of retailers. While the CAT accepted that damages could, in principle, be calculated on an aggregate basis using a weighted average pass-on percentage, it concluded that the methodology proposed by Mr Merricks for doing so was inadequate owing to a lack of evidence as to the availability of the data that would be required to apply the proposed methodology on a sufficiently sound basis. In reaching this conclusion, the CAT looked to the judgment of the Canadian Supreme Court in Pro-Sys Consultants v. Microsoft Corporation,^[38] which it had previously also considered in Gibson v. Pride. In that case, the Canadian court held that the proposed methodology ‘must offer a realistic prospect of establishing loss on a class-wide basis’, and ‘cannot be purely theoretical or hypothetical, but rather must be grounded in the facts of the particular case in question’. In addition, ‘there must be some evidence of the availability of the data to which the methodology is to be applied’.^[39] In the circumstances, the CAT concluded that pass-through cannot be described as a common issue.

The CAT also expressed concern that the proposed distribution of damages envisaged by Mr Merricks would not reflect the governing principle of damages for breach of competition law being compensatory in nature, as it was not linked to a calculation of individual loss. Section 47C(2) CA98 clearly states that the CAT may make an aggregate award of damages in collective proceedings ‘without undertaking an assessment of the amount of damages recoverable in respect of the claim of each represented person’. Nonetheless, the CAT concluded that the absence of any plausible means of calculating the loss of individual claimants so as to devise an appropriate method of distributing any aggregate award of damages meant that the claims were not suitable for an aggregate award of damages, and therefore should not be permitted to proceed as collective proceedings.

However, on appeal, both the Court of Appeal and the Supreme Court reached a different conclusion in regard to commonality and suitability. On the issue of calculating the overcharge, the Court of Appeal held that the CAT’s approach to the expert evidence was based on a misdirection. It considered that the appropriate test should have been whether the CAT was satisfied that the proposed methodology is capable of or offers a realistic prospect of establishing loss to the class with no need for the proposed representative to be able to produce all the evidence and data available to operate that methodology at the certification stage. In the circumstances, the Court of Appeal concluded that pass-on was an issue common to all individual claims as a necessary step in establishing loss by the class as a whole and that this was sufficient to satisfy the commonality requirement. On the issue of distribution of damages, the Court of Appeal held that the CAT had been wrong to consider that the aggregate award of damages had to be distributed on a compensatory basis according to what each individual claimant had lost. It considered that distribution is a matter for the trial judge to consider following the making of an aggregate award, rather than the CAT at the certification stage.

Similarly, the Supreme Court concluded that the CAT had erroneously applied the certification criteria in the Merricks case. In doing so, the Supreme Court considered that the CAT made five errors of law.

Identification of common issues

The CAT had concluded that the overcharge (to retailers) was a common issue, and that this was sufficient to meet the ‘common issues’ hurdle for collective proceedings (there being no requirement for all significant issues in a claim to be common issues in order to qualify for collective proceedings). However, the Supreme Court nevertheless held that the CAT erred in law in failing to recognise that the issue of ‘passing on’ of the loss by retailers to consumers was also a common issue. The CAT had held that there would be significant variations in pass on across the class of claimants, but the Supreme Court agreed with the Court of Appeal that in fact this was a common issue.

The Supreme Court considered that in failing to recognise that both the main issues in the case were common issues, the CAT wrongly started its balancing exercise from the premise that there was only a low level of commonality, rather than viewing the presence of common issues as ‘a major plus factor’. In the Supreme Court’s view, correct recognition of the greater degree of common issues would have been a powerful factor in favour of certification.

Suitability for aggregate damages just one factor

The Supreme Court held that the CAT’s judgment placed too great a weight on its conclusion that the claim was not suitable for aggregate damages: while this is one of many relevant factors in the suitability assessment, it is not a ‘hurdle’ (i.e., a precondition to eligibility) that must be surmounted before certification can be granted. This is not to say that unsuitability for aggregate damages could not still be a key reason – indeed, even a decisive reason – for denying certification of a particular claim. However, the Supreme Court emphasised that where the CAT regards a factor that is not a statutory hurdle to be decisive in refusing certification, this must be made expressly clear.

Relative suitability of collective proceedings versus individual claims

The Supreme Court considered in some detail whether the statutory requirement for claims to be ‘suitable to be brought in collective proceedings’ should be interpreted as meaning ‘suitable in the abstract’, or ‘suitable in a relative sense’, that is, more suitable to be brought in collective proceedings, with an aggregate award of damages, than through individual proceedings with individual damages. Drawing on the Canadian approach, the Supreme Court concluded that the second of these options, relative suitability, is the correct approach: this means that the key question becomes whether it is preferable to bring the claim in collective proceedings, as an alternative to multiple individual claims, taking into account the fact that the purpose of collective proceedings is to address aspects of the individual claim procedure which make it unsuitable for the obtaining of redress at the individual consumer level.

The Supreme Court concluded that in the Merricks case the prospect of individual proceedings by over 46 million consumers would be a ‘practical impossibility’, such that collective proceedings would clearly be preferable. However, outside the context of ‘pure’ consumer claims involving large numbers of claimants each suffering a relatively small individual loss, it is less clear that the same conclusion should be reached – particularly where the proposed class of claimants involves large corporate organisations, higher value individual losses, or where there is evidence of individual claims already having been lodged in parallel with a CPO application.

Difficulties with quantification of loss not a reason to deny certification

The Supreme Court emphasised that, in ordinary civil proceedings, a claimant is not deprived of a trial merely because of ‘forensic difficulties in quantifying damages’. It concluded that the well-established ‘broad-axe’ principle, which requires the court to ‘do its best on the evidence available’, is ‘fully applicable in competition cases’, and not ‘watered down’ in any way in collective proceedings.

The Supreme Court acknowledged that there were ‘undoubted forensic difficulties and shortcomings in the likely availability of data’ in the Merricks case, which affected quantification of the loss suffered. However, given that these difficulties would not prevent an individual consumer’s claim going to trial (assuming it disclosed a triable issue), the Court considered that they should not, in principle, be treated as preventing the claims being brought collectively. The Supreme Court concluded that the CAT therefore erred in law when it regarded difficulties relating to quantification of loss as a good reason to refuse certification. In reaching this conclusion, it considered that it did not matter that data may turn out to be incomplete and difficult to interpret, or that the assembly of the relevant data may involve burdensome and expensive disclosure processes.

Compensatory principle not essential in distribution of aggregate damages

The Supreme Court held that section 47C of the Competition Act 1998 expressly removes the ordinary requirement for the separate assessment of each claimant’s loss. As a result, the CAT erred in law when it required there to be a plausible way of estimating individual loss at the damages distribution stage (the CAT had done so on the basis of the general principle that damages for breach of competition law must be compensatory).

The Supreme Court considered that the only implied requirement is that distribution should be just in the sense of being fair and reasonable. In some cases it may be appropriate to distribute the award in line with individual loss, but there will also be cases where this method would be so difficult and disproportionate that another method would be more reasonable, fair and just. One of the main reasons for the introduction of the power to award aggregate damages in collective actions is precisely to avoid the need for individual assessment of loss.

It is important to note that the Supreme Court’s ruling does not amount to any determination of the CPO application in the Merricks case nor of the merits of the claim. Instead, it provides clear principles against which the CPO application is to be reconsidered by the CAT. The claim was remitted back to the CAT for reconsideration of the question of certification. The application was reconsidered by the CAT in March 2021 and the CAT handed down its ruling on 18 August 2021.^[40] Following the Supreme Court’s ruling in December 2020 the CAT agreed to certify the claim on remittal, based on the principles set out by the Supreme Court. Mastercard had also dropped its opposition to certification of the claims as eligible for inclusion in collective proceedings following the Supreme Court’s ruling.

The CAT was left to determine two further issues, as to whether Merricks could amend the claim form to extend the class to include persons who died before the claim form was issued and whether the collective proceedings could include a claim for compound interest.

On the deceased persons issue, the CAT rejected the argument that claims by deceased persons could be included on the basis of the class definition in the existing claim form, as it expressly excluded deceased persons. Merricks therefore submitted a draft amended claim form, seeking to make a number of changes and amending the estimated size of the class from 46.2 million to 59.8 million. The CAT agreed that, as a matter of policy, it should be possible to include deceased person in collective proceedings, but the normal way to do so would be for the claim to be brought by their estate through those authorised to represent it. That was however not the position taken in the draft amended claim, which treats deceased persons as individuals within the class, and the CAT therefore dismissed the application for amendment.

On the compound interest issue, Merricks had argued that compound interest should be applied as any member of the class would at least at some point during the relevant period have borrowed or saved money, and the overcharge could have returned interest or reduced debt interest payments. Mastercard submitted that the CPO should exclude claims for compound interest as this was not a common issue across the class and no plausible or credible method had been put forward for calculating the loss suffered. The CAT held that compound interest constitutes a distinct head of loss, which must be separately established and cannot be presumed. In the absence of a credible or plausible method of estimating what loss was suffered by way of compound interest on an aggregate basis, this head of claim was not suitable for an aggregate award and could not be fairly resolved in collective proceedings.

Suitability of the proposed class representative

The CAT enjoys a wide degree of discretion when determining the suitability of a proposed class representative. Rule 78 of the CAT Rules provides that the CAT may authorise an applicant to act as the class representative in collective proceedings whether or not the applicant is a class member, provided that it considers that it is ‘just and reasonable’ for the applicant to act as the class representative.^[41] In the first two CPO applications in which judgments have been given by the CAT, objections were raised as to the proposed class representative, but this issue did not prove to be a significant stumbling block. That said, the suitability of the class representative is likely to remain a bone of contention in future cases, in particular in relation to the representative’s ability to pay the defendant’s costs if the action is unsuccessful.

In Gibson v. Pride, Ms Gibson was not a member of the proposed claimant class. Rather, she was the General Secretary of the NPC, and the majority of the 30,000 class members she sought to represent were pensioners. Pride Mobility objected to her acting as the class representative on general suitability grounds and also on the basis that she would be unable to pay their recoverable costs if ordered to do so. The CAT rejected these objections. It held that there was no reason to think that Ms Gibson would be unable to understand the legal advice given to her, or that (in consultation as appropriate with the National Council or Executive Committee of the NPC) she would not be able to take appropriate decisions about the litigation in the interests of the represented class. Notably, the CAT also expressly commented that it did not regard the fact that the impetus for the collective proceedings came from Ms Gibson’s solicitors as objectionable. On the issue of Ms Gibson’s ability to pay Pride’s recoverable costs if the action was unsuccessful, the CAT noted that Ms Gibson had arranged, through third-party litigation funders, an after-the-event (ATE) insurance policy to cover any liability to pay Pride’s costs up to £1.08 million and her own disbursements in the event that the claim was unsuccessful. It concluded that the question of her ability to pay Pride’s recoverable costs was therefore not a basis for refusing to authorise Ms Gibson to act as class representative at that stage (while noting that this particular aspect of Pride’s objections could be considered further at the renewed application for a CPO, which ultimately never took place).

In Merricks v. Mastercard, Mastercard’s objections in relation to the suitability of the proposed class representative did not relate to Mr Merricks (a qualified solicitor with a long and distinguished career in consumer protection) personally, but to the terms of the funding agreement in place with Burford Capital, a third-party litigation funder that had agreed to make £40 million available to fund the action. The funding agreement provided for the return to be paid out of undistributed proceeds and any costs ordered to be paid by Mastercard to Mr Merricks, equal to the greater of: £135 million; or 30 per cent of undistributed proceeds up to £1 billion plus 20 per cent of undistributed proceeds in excess of £1 billion (total investment return). If the CAT made any ‘negative commentary’ on the contemplated transactions the funder could terminate the agreement. In addition, there was a £10 million limit on the funder’s liability for Mastercard’s costs. In summary, Mastercard raised three objections:

• the funding agreement would not enable Mr Merricks to fund the litigation or pay Mastercard’s recoverable costs (if so ordered), since it could be terminated by the funder;
• the £10 million limit on the funder’s liability for Mastercard’s costs was inadequate (and therefore Mr Merricks did not meet the statutory requirement that he ‘will be able to pay the defendant’s recoverable costs if ordered to do so’); and
• the arrangement gave rise to a conflict of interest.

The CAT rejected these objections, once certain modifications had been made to the funding agreement at the hearing.^[42] In particular, in an assessment that will also be of importance for future claims, it concluded that the funder’s return could be paid out of the undistributed proceeds if the claim was successful, on the basis that the concept of ‘costs or expenses’ in Section 47C(6) CA98 covers a liability to pay the charge of a third-party funder.

On remittal of the application to the CAT, following the Supreme Court’s ruling in December 2020, the CAT carefully considered the terms of a new litigation funding agreement in place with a new litigation funder, Innsworth Capital Ltd. The CAT was satisfied with the increased amount of funding available under the new agreement, but expressed concern that, in relation to the termination of the agreement, too much discretion was left with the funder, who was under no obligation to take independent advice prior to terminating the agreement. The funder subsequently amended the agreement to include a requirement for independent legal and expert advice to be provided to it when making a decision as to whether to terminate the agreement. On the issue of Merricks’ ability to pay in case costs are awarded in favour of Mastercard, Mastercard was seeking an undertaking by Innsworth Capital that it would discharge a liability for costs ordered against Merricks. The CAT concluded that Mr Merricks should be authorised as the class representative provided that a suitable undertaking as to liability for costs is given by the funder in case an award of costs were to be made in favour of Mastercard.

One further as yet unresolved question is how the CAT will deal with a scenario where there are two competing class representatives seeking certification of collective proceedings. This is a live issue in both the CPO applications made in respect of the Trucks infringements (where an opt-out application has been made by UK Trucks Claim Ltd and an opt-in application has been made by the Road Haulage Association) and the CPO applications made in respect of the Forex infringements (where both applications have been made on an opt-out basis). At a case management conference held on 12 December 2018 regarding the Trucks applications, Roth J made clear that the CAT did not consider there to be anything as a matter of law to prevent two competing CPOs from proceeding where either both applications are made on an opt-in basis or, as in the Trucks cases, one is made on an opt-in basis and one on an opt-out basis. In either of those scenarios, choosing between the two actions will be a matter for the individual claimant.^[43] However, the position is different where two opt-out applications have been made on behalf of the same or overlapping classes. The CAT Guide to Proceedings 2015 makes clear that in this scenario, the CAT must decide which application may proceed, if either. In the Forex applications, the CAT held on 6 March 2020 that the two competing applicants must go ‘head to head’ for the right to represent the potential class in one single substantive hearing (the hearing took place 12 to 16 July 2021), which will also determine whether a CPO is made at all.^[44] In reaching this conclusion, the CAT rejected the approach taken in other jurisdictions with well-established class action regimes, such as Canada, where ‘carriage disputes’ are usually heard as preliminary issues prior to class certification. The Canadian approach was favoured by both competing CPO applicants in this case, and a number of the respondents, who were seeking an early resolution of the carriage dispute to save costs. However, the CAT held that the carriage dispute was not necessarily a discrete matter capable of being determined as a preliminary issue ahead of the CPO application hearing. Therefore, it ordered a single substantive hearing to determine both whether to grant a CPO at all, and if so which CPO applicant will prevail.^[45]

Right of appeal against CAT decisions on certification

Following the CAT’s 2017 decision to refuse certification in Merricks v. Mastercard, the CAT also refused Mr Merricks’ application for permission to appeal against that decision. It considered that the Court of Appeal did not have jurisdiction to hear an appeal because there was no provision in the relevant legislation relating to appeals against decisions of the CAT to grant or reject CPOs.^[46]

However, Mr Merricks subsequently applied to both the Court of Appeal for permission to appeal and the Administrative Court for judicial review. On 13 November 2018, the Court of Appeal ruled that there is in fact a right to seek permission to appeal against CAT rulings refusing an application for a CPO, on the basis that such a decision constitutes a decision ‘as to the award of damages’ within the meaning of Section 49(1A) CA98.^[47] Giving the unanimous judgment of the court, Patten LJ concluded that:

a refusal of a CPO is likely to prevent individual members of the represented class who have suffered loss from obtaining any compensation. It is therefore the end of the road for a class action of this kind and, as such, a decision as to the award of s.47C(2) damages. The fact that class members are left with their individual claims is nothing to the point.^[48]

There is a further right to seek permission to appeal against a Court of Appeal judgment on certification to the Supreme Court on questions of law, as illustrated by the grant of permission on 25 July 2019 for Mastercard to appeal the Court of Appeal’s judgment in Merricks v. Mastercard to the Supreme Court.^[49]

Now that the existence of a statutory right to apply for leave to appeal against CAT decisions to refuse certification of collective proceedings has been established, it seems likely that applications to challenge such decisions will become commonplace in cases where significant amounts of damages are at stake.

Formal aggregation options before the High Court

Representative actions

Rule 19.6 of the CPR permits a representative to bring a claim on behalf of other persons where the representative and the other persons have ‘the same interest’ in the claim.^[50] A judgment in a representative action is binding on all persons represented in the claim, notwithstanding that the persons represented in the claim are not named parties. However, the requirement that the representative and all the represented persons have ‘the same interest’ has traditionally been applied narrowly: the class members must all have the same interest in one cause of action, and all seek the same remedy.

In the competition law context, in Emerald Supplies v. British Airways,^[51] the Court of Appeal upheld a decision by the English High Court to strike out an attempt by Emerald Supplies to use this form of action to claim damages on behalf of itself and all other direct and indirect purchasers of air cargo services from British Airways allegedly affected by a price-fixing cartel.^[52] The Court considered that Emerald Supplies could not satisfactorily identify whether a represented person would qualify for damages (and therefore have ‘the same interest’ in the claim at all stages in the proceedings as other members of the represented class) until a decision was made on the issue of whether or not competition law had been infringed.^[53] It also identified an additional difficulty in concluding that the representative and all the represented persons had the same interest in the claim where there was scope for dispute within the class as to whether there was and the extent of passing on (as the claim involved both direct and indirect purchasers).^[54] As a result, the claim could not be brought within the scope of the representative action procedure.

Following on from this judgment, we understand that this form of representative action has not been used again in a competition law context for the purpose of bringing a damages claim on behalf of multiple claimants. It remains to be seen whether the more permissive approach recently adopted by the Court of Appeal to the use of representative actions pursuant to Rule 19.6 of the CPR in Lloyd v. Google (in a non-competition law context) ‘re-opens the door’ to the use of this form of collective action for competition claims (currently on appeal to the Supreme Court).^[55]

Group litigation order

A less restrictive alternative to the representative action under CPR Rule 19.6 is to bring a claim involving multiple claimants pursuant to a group ligitation order (GLO), a procedure introduced in May 2000,^[56] which provides a system of case management for claims based on ‘common or related issues of fact or law’.^[57] To conduct proceedings within the GLO case management framework, it is necessary to first obtain court approval in the form of a GLO.^[58] All claimants wishing to join the group must then actively opt in by applying to be entered onto a group register by a date specified by the court. The common or related issues of fact or law are designated ‘GLO issues’, and a judgment in relation to any GLO issue is then binding on all parties to the claims being managed under the GLO.^[59]

While GLOs have been made in a broad variety of cases,^[60] they have not proven popular for competition claims (although a GLO was suggested as a potential alternative route at first instance in the Emerald Supplies case discussed above).^[61] Indeed, the list of GLOs maintained by the UK government indicates that only one GLO has ever been issued in a competition case (Prentice v. Daimler Chrysler),^[62] out of 112 GLOs in total.^[63]

Informal aggregation and joint case management (High Court and CAT)

In addition to the more formal means of aggregating claims (or certain aspects of claims) in a single set of proceedings, it is also possible simply to name multiple claimants when initiating a competition claim. In the High Court, Rule 7.3 of the CPR allows claimants to take this approach in respect of ‘all claims which can be conveniently disposed of in the same proceedings’. In practice, the CAT also adopts a similar approach for claims initiated in the CAT.

In this way, for example, multiple claimants (whether related or not) can jointly commence an action for damages for infringements of competition law. In addition, even where claims are not initiated jointly, they can be consolidated to be heard jointly, or, more commonly, jointly case-managed, allowing common or similar issues to be heard and dealt with together. In practice, these various forms of informal claims aggregation have proven to be a popular way of bringing joint claims or aggregating similar claims.

A further recent trend is increased use of the transfer mechanisms that allow for claims relating to similar underlying facts to move between the High Court and the CAT, paving the way for subsequent joint case management.^[64] As well as ensuring efficient case management by a specialist tribunal, this approach reflects the courts’ desire to avoid the risk of inconsistent outcomes where multiple claims relating to similar underlying facts are heard in different forums, as occurred in the interchange fee damages litigation, where differing judgments were reached on key issues in different first instance courts.^[65] The Court of Appeal expressly stated in its judgment on the Interchange Fees cases that it was in favour of transfer to the CAT for all claims for damages based on infringement of UK or EU competition law, in light of the specialist nature and other advantages enjoyed by the CAT.^[66]

It is notable that the popularity of these informal methods of aggregating claims has continued notwithstanding the introduction of the expanded competition-specific collective actions regime. There are a number of reasons for this. Clearly, not all competition damages claims involving (or potentially involving) multiple claimants will be suitable for a CPO, and claimants may not wish to go through the extra hurdle of CPO certification in circumstances where this is not essential to the advancing of the claims. In practice, the Section 47B CA98 regime is most suited to claims involving large numbers of consumers or small businesses,^[67] that have each suffered a relatively small loss, where it would be unattractive (both in terms of cost and the amount of work involved) to bring an individual claim. Moreover, even where the CPO route is a possibility, larger companies pursuing claims for significant sums may prefer to maintain direct control over the conduct (and potential settlement) of the claim, rather than delegating authority to an independent class representative.

Assignment of claims to special-purpose vehicles

The assignment of damages claims to special-purpose vehicles (SPVs) has become a feature of the competition litigation landscape in a number of jurisdictions, most notably the Netherlands,^[68] and Germany (albeit subject to a recent setback in the Financialright Claims case).^[69] This route has not yet been used in the UK for competition damages claims, except in the context of a number of recent CPO applications in which a limited company has been established for the purpose of making the CPO application and bringing the proposed collective proceedings (for reasons including limitation of liability, succession and maintenance of separate accounts).^[70] However, in those cases, the special purpose vehicle is acting as a (proposed) class representative, on behalf of the (proposed) class of claimants, rather than the relevant claims being assigned to the SPV and bundled together to be brought directly by it.

The unpopularity of assignment of damages claims to SPVs in the UK stems largely from the fact that, for many years, it was considered that such an approach would be impermissible under historic rules prohibiting third parties from supporting an unconnected party’s litigation, known as the doctrines of maintenance and champerty.^[71] While those rules have been relaxed in recent years, and third-party litigation funding is now generally permitted (and indeed becoming a critical feature of the competition litigation landscape – see further below), it seemed clear until relatively recently that the rules would be applied more strictly where claims were assigned to a third party to pursue in its own name. It was thus expected that the courts would refuse to recognise, on the grounds of public policy, the assignment of a bare right to litigate (i.e., where the assignee does not have an interest sufficient to justify pursuit of proceedings for his or her own benefit).^[72]

However, the cases of JEB Recoveries LLP v. Binstock^[73] and Casehub Ltd v. Wolf Cola Ltd^[74] suggest that there may be scope for the UK courts to adopt a more flexible approach. In both those cases, claims that had been assigned to a third party were permitted to proceed and were held not to infringe the rules of maintenance and champerty. The Casehub judgment is particularly interesting, in that the business model pursued by the claimant – described by the court as ‘a company which builds consumer group actions online’ – appears similar to the practice seen in other jurisdictions of SPVs ‘bundling’ assigned damages claims.

That said, these judgments do not appear to have led to a significant increase of assignment of claims to third parties in the UK, and at the time of writing this route has not been pursued in the context of a competition damages claim (other than the use of an SPV to act as a proposed class representative for the purpose of collective proceedings, as discussed above). Each case will turn on its facts, and it would certainly be dangerous to interpret the JEB Recoveries and Casehub decisions as giving carte blanche to the practice of assigning claims to an SPV where they are to be pursued in the English courts. Furthermore, seeking to bring a competition claim in this way is arguably largely unnecessary in light of the other options available to victims of competition law infringements before the UK courts.

Growth of third-party litigation funding

The historical restrictions on third-party litigation funding on the basis of the doctrines of maintenance and champerty have been significantly relaxed, and the market for third-party litigation funding in the UK is growing at pace. Claims for damages based on breaches of competition law are one of a number of different areas where such funding is now increasingly commonplace: litigating competition law claims can be very complex and costly, involving extensive expert economic evidence, such that bringing individual actions may not be economically viable, in particular for consumer or small business claimants. Unsurprisingly, third-party funding has therefore proven particularly important in the context of opt-out collective actions commenced under the expanded Section 47B CA98 regime, where the class representative is exposed to significant costs risks.^[75] Indeed, all of the CPO applications made at the time of writing are known to have involved third-party litigation funding to some extent (although little detail about the arrangements is publicly available, with the exception of the arrangements in Merricks v. Mastercard, which were considered in some detail by the CAT – see above).^[76]

When the 2015 collective actions reforms were first introduced, concerns were raised about a perceived lack of incentives for funders, given the default position under Section 47C(5) CA98 that any unclaimed damages in an opt-out collective action (likely to be substantial in practice)^[77] are paid to a prescribed charity, currently the Access to Justice Foundation (subject to the power of the CAT to order that all or part of such funds is paid to the class representative in respect of all or part of the costs or expenses it incurred in connection with the proceedings).^[78] However, in Merricks v. Mastercard, the CAT confirmed that third-party funders could be paid from any unclaimed damages^[79] and also dismissed objections to the funding agreement entered into with Burford Capital in that case (once certain modifications had been made to the agreement).^[80] As a result, the trend for the involvement of third-party funders in competition collective proceedings is expected to continue (and is likely to be fundamental to the future development of the regime).

Settlement dynamics in collective claims

In practice, competition claims in the UK are often settled before trial. This trend is supported by the wide range of alternative dispute resolution mechanisms available in the UK (including mediation, adjudication and expert determination) and the UK courts’ encouragement thereof. In claims involving multiple claimants, the dynamics of possible settlement of the claim can be particularly complex and a number of issues require careful consideration.

As with any multi-party settlement, it is critical to ensure that the parties to any settlement agreement are properly identified, so there is no room for doubt as to which parties are bound by it. In terms of settlement strategy, in some cases there may be advantages for defendants in entering into multiple different settlement agreements, playing off the various claimants against each other, and potentially settling with some earlier than others, or on different terms. In other cases, it may be preferable to insist on settling with all claimants (for ‘global peace’) or not at all, on the basis that it is not worthwhile from the defendant’s perspective to settle any of the claims if it will still have to spend time and money defending the remaining claim.

Consideration will also need to be given to the risk of additional claims ‘coming out of the woodwork’ at a later date; in practice, this may mean that it is difficult to agree a settlement until the relevant limitation period for the claims has expired. From the claimants’ perspective, determining how long to hold out before settling will depend not only on the strength of the claim, but also on factors such as costs, the existence or indeed absence of a coordinated settlement strategy with the other claimants, and the amount of damages being sought compared to the amount being offered by way of settlement. Differences between claimants can materialise in these situations.

For claims in respect of which an opt-out CPO has been (or could be) issued by the CAT, specific rules apply to collective settlement of the claim, giving the CAT the power to review and approve the terms of the settlement.^[81] The detailed procedure is beyond the scope of this chapter. However, in summary, where an opt-out CPO has been made, the CAT may make a collective settlement approval order^[82] where it is satisfied that the terms of the settlement are ‘just and reasonable’.^[83] Where no CPO has been made, but could have been, the CAT has similar powers to review and approve any proposed collective settlement, but the parties must first apply for a collective settlement order (analogous to a CPO application but made by the proposed settlement representative and would-be defendant), followed by an application for a collective settlement approval order.^[84]

This collective settlement procedure does not apply to opt-in collective proceedings, although the CAT’s permission is required to settle such proceedings if the date specified in the CPO for opting in to the claim has not yet expired at the time of the settlement.^[85]

Conclusion

The competition litigation landscape in the UK is at a particularly interesting stage of its development in respect of collective actions. Long recognised as a dynamic and ‘claimant-friendly’ forum for competition damages claims more generally, the UK now also has an expanded competition-specific opt-out collective actions regime that is really ‘getting off the ground’, alongside an established alternative route for claims aggregation and joint case management for cases involving multiple claimants where a CPO application is not considered suitable.

Notwithstanding the clarifications provided by the Supreme Court in Merricks, important questions remain as to how the legal test for CPO certification will be applied in practice. These questions are now starting to be answered, with the first certification decision by the CAT adopted on 18 August 2021. The CAT’s determination in this case of the further issues relating to the deceased persons and to the compound interest issues shows that, despite the more permissive approach to certification taken by the Supreme Court, the CAT will continue to carefully consider and scrutinise all issues in CPO applications in its certification process. A number of CPO certification judgments are expected to be handed down in the latter part of 2021 and will no doubt provide further clarification on a host of issues. This will open up the next phase in the development of competition collective proceedings in the UK, to be closely watched by potential claimants and defendants alike.

Notes