"Have another go": UK competition claim against Meta sent back to the drawing board
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
|Cases and references|
Dr Liza Lovdahl Gormsen v Meta Platforms, Inc and Others
|Court||Competition Appeal Tribunal|
|Cause of action||Abuse of dominance|
The United Kingdom’s Competition Appeal Tribunal (CAT) has issued a judgment without approving or rejecting the proposed class representative (PCR)’s application for a collective proceedings order against Meta. The tribunal found significant issues with the PCR’s expert evidence and held that it required a “root-and-branch re-evaluation”. The PCR now has six months while the proceedings are stayed to “have another go” at producing a “new and better blueprint” for the effective trial of the proceedings.
The PCR’s claim against Meta is a bold attempt to bring a competition class action that would more traditionally have been framed as a data privacy or consumer protection claim. While it is encouraging for defendants that the CAT is applying scrutiny to claims like this, it is also clear that the tribunal is reluctant to reject these certification applications on their first try. Instead, PCRs still have significant leeway to go back to the drawing board and reformulate elements of their claims.
In February 2022, Dr Liza Lovdahl Gormsen (the PCR) applied to bring opt-out collective proceedings (worth an alleged £2.2 billion, or around £50 per class member) against three Meta entities, on behalf of 45 million UK Facebook users. Gormsen alleged that, from 2016 to 2019, Meta abused its dominant position in the market for social media services by:
- imposing requirements on Facebook users to give Meta permission to collect, share and otherwise process their personal data and view targeted advertising on Facebook (the ‘unfair data requirement’);
- charging Facebook users an unfair price for access to the platform, in the form of personal data that Meta collected rather than a monetary amount; and
- implementing terms and conditions that were complex, far-reaching, opaque, misleading and imposed on a “take it or leave it” basis (the ‘other unfair trading conditions’).
The CAT’s decision on certification
The CAT handed down its judgment after a three-day hearing and less than three weeks’ deliberation. In its decision, the CAT considered two key issues:
- whether the expert methodology put forward by the PCR was sufficiently credible or plausible to establish some basis in fact for establishing loss on a class-wide basis (the ‘Pro-sys' test); and
- whether the proceedings could be justified in terms of cost/benefit.
The CAT held that the PCR had failed to meet the Pro-Sys test, observing that the test’s purpose was to minimise risks of the parties incurring unnecessary costs, the CAT’s time being wasted and the matter coming to trial in an unmanageable form.
The CAT emphasised that when dealing with novel cases the roadmap for resolving difficult questions needs to be identified at the certification stage, not further down the line. This followed the Court of Appeal’s recent criticism of the CAT for having failed to lay down a pathway for the trial of the deep-sea shipping collective proceedings (Mark McLaren v MOL  EWCA Civ 1701).
The Pro-Sys test
The CAT held that the PCR’s case was not sufficiently credible because of inadequacies in the pleading of the three alleged abuses and problems with the expert methodology.
The tribunal was critical of the expert’s conceptual framework, pointing out that the appropriate counterfactual for assessing loss varied significantly between the PCR’s three alleged abuses. By contrast, her expert had only provided a single methodology based on counterfactuals where the market for social media services was more competitive.
The CAT also noted “mismatches, inconsistencies and deficiencies” between the two reports prepared by the PCR’s expert, and the manner in which the methodology was described during the oral hearing, which would have to be clarified before the claim could proceed.
The tribunal was critical of how the three alleged abuses were pleaded. It analysed the different types of abuse alleged by the PCR and found the following:
- Any loss caused by the unfair data requirement would have to be calculated on the basis that data would, otherwise, not have been extracted. The PCR’s expert incorrectly matched alleged “excessive profits” earned by Meta from advertisers with the alleged loss suffered by users. However, competition law does not operate a form of compensation based on the clawing back of unlawful gains – it is designed to compensate loss.
- The unfair trading conditions claim was, in substance, a claim that the class was misled into accepting the relevant terms. The effect of any alleged misleading statements would be specific to each member of the class, so the claim was likely unsuitable for collective proceedings. Moreover, it seemed likely that in the counterfactual, class members would either have signed up anyway or not signed up at all; it seemed unlikely that terms and conditions would have been renegotiated. The CAT also noted that it was “extraordinarily difficult to pigeonhole” this allegation into a competition law abuse-of-dominant-position claim.
- For the unfair price claim, the tribunal accepted that it was relevant to consider a counterfactual where unfair prices were not imposed. However, there were several difficulties with the PCR expert’s methodology. It simply involved comparing Meta’s pricing with how alternative markets might work, which did not help to resolve the question of whether the price was abusive. It also failed to engage with the multi-sided nature of the market. Meta was selling advertising services to advertisers, as well as social media services to users, and these two markets would have interacted with each other in complex ways.
For these reasons, the CAT found there was no effective blueprint for the efficient and effective trial of the issues raised by the PCR. As such, it also held that any cost/benefit analysis would clearly point against permitting the claim to go to trial, given that it would be a waste of costs and time.
Common pitfalls for PCRs
The CAT called out two common misapprehensions that PCRs generally make, both of which were present in this application:
- an open-ended and uncertain approach to disclosure – to the extent that the expert methodology depended on disclosure from the proposed defendants, the CAT said that it would expect the expert to have articulated what disclosure was required ; and
- the so-called ‘not my problem’ fallacy – in this case, the PCR asserted that it would not be for her to make good a point on which the proposed defendants bore the burden of proof. The CAT said that, if a proposed defendant made clear at the certification stage that a certain point would be taken, it was incumbent on the representative to show how that point could be addressed. The CAT acknowledged and emphasised that this would require defendants to put their “cards on the table” at the certification stage.
“Have another go”
Broadly, this decision is a positive sign that the CAT is applying proper scrutiny at the certification stage, particularly to PCR experts’ methodologies. After a wave of applications for collective orders brought against tech companies in the wake of Lloyd v Google, it is reassuring to potential defendants that the CAT is grappling with the challenges faced by these cases early on in proceedings.
Despite Meta inviting the CAT to reject the certification application because of the significant issues identified, the CAT said that its preference was to let the PCR “have another go”. This decision is consistent with the importance of access to justice articulated by the UK Supreme Court in the Merricks saga. The CAT has stayed the case for six months to give the PCR an opportunity to file additional evidence, setting out a “new and better blueprint leading to an effective trial”.
However, the CAT made it clear that the PCR’s methodology required a thorough re-evaluation, not mere tinkering. If the PCR disagreed, she could seek a review of the CAT’s decision at the Court of Appeal. If the PCR fails to file additional evidence to set out this new and better blueprint, the CAT said that it will lift the stay and reject the certification application. Otherwise, it will give directions for the determination of the renewed application.
The amount of leeway granted by the CAT in this case demonstrates that it is still extremely difficult for a proposed defendant to have the certification application rejected, at least on a first attempt. In reality, despite the CAT’s focus on avoiding the risk of parties incurring unnecessary costs, this means that the proceedings (and their costs) will continue to run on while the PCR goes back to the drawing board with their expert.
Meta did not apply for strike out or summary judgment of the claims. While the CAT has the discretion to strike out the claim form of its own initiative, it has not done so here. This means that the CAT proceeded on the basis that the claims, as novel as they were, were arguable and ought to proceed to trial.
However, the tribunal was robust in its discussion of the PCR’s claims. It was clear that any claim seeking an account of Meta’s profits could not succeed. It also outlined the serious issues facing the unfair trading conditions claim in terms of the tribunal’s jurisdiction (it could not hear a misrepresentation claim) and its unsuitability for collective proceedings (to the extent that it was based on an individual class member’s reliance on statements). While it was careful not to express its concerns in terms of the claims’ merits, the CAT quite clearly delineated the kinds of claims that it is not going to allow past the certification stage if they are still included after the reformulation.
The road ahead
The PCR has, so far, declined to comment on whether she will file additional expert evidence. All eyes will now be on her (and her litigation funder) to see whether they will have another go at seeking to pursue this novel claim.