United Kingdom: Class actions – litigation, policy and latest developments
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
On 1 October 2015, a collective (or class) action procedure for breaches of competition law was introduced in the UK that enables a class representative to bring a claim in the Competition Appeal Tribunal (CAT) on behalf of a defined class of claimants, which may be comprised of both individuals and businesses. The procedure is the primary mechanism for collective redress in competition cases in the UK and has become increasingly popular in recent years. Claims can be brought on an ‘opt-in’ or ‘opt-out’ basis and may be stand-alone or follow-on.
Actions brought by the class representative may only be continued if the CAT makes a collective proceedings order (CPO): confirming that the claims are eligible for inclusion in collective proceedings; authorising the proposed class representative; determining the description of the class of persons whose claims are eligible for inclusion; and outlining whether the proceedings will be on an opt-in or opt-out basis.
Claims can be brought while an investigation by a competition authority is ongoing or during an appeal of a competition authority decision. However, in practice, the CAT may stay the claim until the resolution of such proceedings (including on application by the class representative or the defendant).
Aside from the CPO regime, collective redress is also available for competition (and other) claims in the UK High Court pursuant to the UK Civil Procedure Rules (CPR). The two main mechanisms are:
- group litigation order (GLO): a court order providing for the joint case management of claims which give rise to common or related issues of fact or law. A group register is established onto which claims by individual claimants are entered. The court can refuse entry onto the register if it is not satisfied that the case can be satisfactorily managed by way of GLO. Individual claimants under a GLO may appoint a single solicitor or firm to conduct the claims, but this is not obligatory; and
- representative actions under CPR (Part 19, section II): the court may direct that where one or more persons has the same interest in a claim, that claim may be brought or continued by one or more persons as representatives of any other person who has that interest. Any order of the court is binding on all represented persons. Where a person is represented by the claim but not party to it, the order may be enforced against them only with the permission of the court.
The rest of the overview focuses on claims brought under the CPO regime.
Anticompetitive behaviour suitable for class actions
Collective actions are particularly suited to anticompetitive behaviour with widespread impact, but where the value of individual claims is insufficient to justify individual actions, such as claims involving breaches of consumer rights. Recent claims include those based on alleged:
- abuse of dominance and excessive pricing in relation to the supply of video games and in-game content;
- resale price maintenance in relation to the supply of musical instrument products; and
- abuse of dominance in relation to app distribution and payment services.
Competition authority findings and court decisions
Decisions of the CMA (and UK sectoral regulators with competition powers) are binding on the CAT (and the High Court). Therefore, if a claimant brings a follow‑on collective action in reliance on a decision taken by the CMA, or a relevant sectoral regulator, it does not need to establish that the defendant has infringed competition law; it must only show that it has suffered loss caused by the infringement.
EC infringement decisions made before the end of the Brexit transition period, or after the end of the transition period in a continued competence case, are also binding on the High Court and the CAT. EC decisions or decisions of the European courts in respect of investigations initiated after Brexit are not binding on the High Court or the CAT, although they may have regard to such decisions when deciding cases.
Decisions of national competition authorities other than the CMA (and UK sectoral regulators) are not binding on the High Court or the CAT. The same applies to decisions taken by UK sectoral regulators, otherwise than pursuant to their competition law powers. However, those decisions can be treated as evidence that an infringement of competition law has occurred – for example, inLe Patourel v BT where provisional findings by Ofcom were accepted as prima facie evidence of excessive pricing.
Collective proceedings for breaches of competition lawmay only be brought by persons with a genuine interest in the claim, such as representative bodies (ie, trade, professional or consumer associations) or potential individual claimants. The class representative must be certified by the CAT before it can commence proceedings.
Assembling a class
A CPO will only be granted where the CAT considers: (i) that it is ‘just and reasonable’ for the class representative to act for the class members; and (ii) that the claim in question is ‘eligible’ to be brought on a collective basis (see further below).
The criteria for choosing class representatives
In determining whether it would be just and reasonable for the proposed representative to represent the class, the CAT will consider whether the applicant:
- would fairly and adequately act in the interests of the class members – here, the CAT will consider whether the proposed representative is a member of the class (although this is not necessary) or a representative body, and whether the proposed representative has prepared a satisfactory plan for the collective proceedings;
- has any material conflict of interest with those of the class members;
- will be able to pay the defendant’s recoverable costs if ordered to do so;
- will be able to satisfy any undertaking as to damages required by the CAT if an interim injunction is sought; and
- would be the most suitable representative – in circumstances where there is more than one proposed class representative seeking approval in relation to the same claim.
Although the CAT is only formally required to consider the suitability of the proposed class representative at the CPO certification stage, in practice it will continue to have regard to this throughout the proceedings and may vary or revoke the CPO if the requirements are no longer being met.
Steps in successfully certifying a class
In certifying claims as eligible for inclusion in collective proceedings, the CAT will consider whether the claims are: (i) brought on behalf of an identifiable class of persons; (ii) raise common issues; and (iii) are suitable to be brought in collective proceedings.
In considering the third criterion, the CAT will take into account various practical considerations, including:
- whether collective proceedings are an appropriate means for the fair and efficient resolution of the common issues;
- the cost or benefits of bringing the proceedings collectively;
- the size and the nature of the class;
- if it is possible to determine with certainty whether a given person is or is not a member of the class; and
- whether the claims are suitable for an aggregate award of damages.
Following the Supreme Court’s landmark decision in Merricks, the CAT has so far set a very low bar for claimants seeking certification of class action claims.
Notifying class members
Claims may be brought on an opt-in or opt-out basis. In opt-in proceedings, class members must opt-in to be included in the class. In opt-out proceedings, UK-domiciled class members are automatically included unless they opt-out, but non-UK domiciled class members must specifically opt-in to the claim.
The class representative must give notice of the CPO to class members. Such notice must:
- annex the CPO order and details of the defendant’s identity;
- include a summary of the claim form and common issues;
- explain that any judgment on common issues for the class or any sub-class will bind represented persons;
- describe how to opt in or opt out; and
- provide any other information the CAT directs.
Assessment of damages in class actions
Damages are the tortious measure that aims to put the claimant in the position they would have been in ‘but-for’ the competition law infringement. This is often a matter for determination with the benefit of expert evidence. Exemplary damages are not available.
The process for settling claims
Collective settlement of class action claims is possible under the CAT’s collective actions regime. Different procedures apply depending on whether the proceedings are on an opt-in or opt-out basis, and the timing of the proposed settlement.
For opt-out proceedings where a CPO has already been granted, a collective settlement must be approved by the CAT to be binding. The defendant and the class representative must make a joint application to the CAT for settlement of the proceedings. In determining whether to authorise the settlement, the CAT will consider whether the settlement terms are ‘just and reasonable’, having regard to the size of the class covered by the settlement; the amount and terms of settlement; the likelihood of a higher amount being awarded at trial; and the likely cost and duration of trial. In assessing this, the CAT may have regard to submissions by the parties’ experts, legal counsel and any individual class member. The settlement can include parties outside of the UK, provided that they have opted into the proceedings.
For opt-out proceedings where no CPO has yet been granted (and so claims have not yet properly commenced), settlement is also possible (in accordance with the procedure described in the section below). Opt-in proceedings are not subject to these requirements. However, they cannot be settled before the expiry of the time by which a class member must opt-in to the proceedings.
If aggregate damages are awarded, the CAT will give directions as to how the aggregate amount is to be distributed and when members of the class should claim their entitlement. Where there are undistributed damages, the CAT may direct that they are to be applied in respect of the representative’s costs and, subject to that, they will usually be paid to charity. In Le Patourel v BT, the Court of Appeal held that the CAT may award damages in any way it sees fit to ‘maximise recovery and compensation for the class’. Here, an account of credit to BT customers’ accounts would be permissible.
Where an application is made for collective settlement, the application should explain how the defendant proposes to pay the settlement sums and how they are to be distributed, as well as how represented persons can claim their entitlement. Unlike damages awards, unclaimed settlement sums can revert to the defendant if approved by the CAT. So far, no settlements have been reached in CPO claims, and so we are yet to see how the regime works in practice.
Recognition of collective settlement in the absence of claims
It is possible for potential claimants and defendants to CPO proceedings to settle before any CPO is authorised, in a process known as ‘direct settlement’. There are three main stages: (i) approval of the collective form of process; (ii) approval of the terms of settlement as just and reasonable; and (iii) administration of the settlement. The main difference between direct settlement and the settlement regime following a CPO is that the CAT must first satisfy itself that: the proposed settlement representative is suitable and will act fairly and adequately in the interest of the proposed class members; and the claims would be suitable to be included in collective proceedings if collective proceedings were brought. The CAT will then go on to consider whether the settlement terms are just and reasonable before making any settlement order.
If approved, the settlement will bind all members of the proposed class who do not opt out, and will bring to an end (or preclude the commencement of) proceedings brought on behalf of the proposed class. Settlements are binding on persons domiciled outside of the UK who have opted in to the proposed settlement.
Mandatory or voluntary redress schemes
Mandatory redress schemes are not available. However, the Consumer Rights Act 2015 introduced new regulations allowing the CMA to approve voluntary redress schemes (the Regulations). Where a business offers such a scheme, those affected by an infringement of competition law established by the CMA, the EC or other sectoral regulators with competition powers can obtain compensation without the need to litigate. In return, businesses offering such schemes can benefit in a reduction of up to 20 per cent in the fines imposed by the relevant authority for breaches of competition law.
Businesses wishing to utilise such schemes must apply to the CMA for approval of the scheme. The CMA must then consider whether the terms of the scheme have been devised in accordance with the Regulations. The CMA can only approve a voluntary redress scheme unconditionally if it contains all the terms and information required by the Regulations and has been devised in accordance with the process set out therein.
However, the CMA can grant conditional approval provided the applicant gives details of when and how the scheme will comply with the Regulations. Conditional approval must include conditions to ensure compliance with the Regulations by a certain date.
Right to appeal
Appeals against final determinations of the CAT in class action proceedings can be made to the CAT or directly to the Court of Appeal. Permission is required and appeals are only possible on points of law as to, among other issues, an ‘award of damages’.
By contrast, there is no statutory provision for appeals against the CAT’s decision on whether to grant a CPO, meaning such applications would in theory need to be made by way of judicial review. However, in Merricks the Court of Appeal confirmed that a ruling by the CAT to refuse a CPO in an application seeking aggregate damages was a decision relating to the ‘award of damages’, over which the Court of Appeal had jurisdiction.
Other strategic considerations
After a slow start following its introduction in 2015, the UK collective actions regime has undergone a transformation following the Supreme Court’s Merricks decision, which significantly lowered the bar for certification of CPO claims. Nine such claims have now been certified.
As it becomes busier, the CAT’s procedure is developing and maturing. For example, it has given itself the ability to hear common issues across different claims in ‘umbrella proceedings’, which we anticipate will be adopted in the interchange direct purchaser andMerricksactions, and are likely to become a common feature where parallel claims concerning different levels of the supply chain raise common liability issues or pass-on. The CAT’s approach to the level of scrutiny to be applied to the merits of claims is also of note, with a number of recent decisions making it clear that the CAT has no appetite for conducting ‘mini-trials’ of certain issues at the CPO, rather than the substantive hearing stage – for example, the Gutmann,Apple and Le Patourel cases where the CAT gave short shrift to the defendants’ applications for strike out or summary judgment on the basis that the claims had no prosect of success. In light of this, defendants should carefully consider whether these types of applications are worth the time and cost or if they might be better served by early preliminary issue applications, which may be more favourably received by the CAT.
It is also important to consider the mechanics of CPO cases. The expense of bringing CPO proceedings, combined with the fact that the class members are not directly involved in funding them, means that ‘third-party funding is a necessary feature of many collective proceedings’ as someone inevitably needs to step in and foot the bill. However, with the CAT concluding in Qualcomm that a proposed 15 per cent to 25 per cent allocation of any damages to a funder was not a barrier to CPO certification, the possibility of lucrative returns in large scale opt-out class actions means that there is no shortage of appetite for such claims among litigation funders.
Alex Neill Class Representative Ltd v Sony Interactive Entertainment Europe Ltd & Ors (Case No. 1527/7/7/22); Elisabetta Sciallis v Fender Musical Instruments Europe Ltd & Another (Case No. 1437/7/7/22); Rachael Kent v Apple Inc & Another  CAT 28.
 Justin Le Patourel v BT Group PLC  CAT 30.
 Walter Merricks CBE v Mastercard Inc & Ors  UKSC 51.
 BT Group Plc v Le Patourel  EWCA Civ 593, paragraph 88.
 Merricks v Mastercard Inc  EWCA Civ 2527.
 Walter Merricks CBE v Mastercard Inc & Ors  UKSC 51.
 Gutmann v First MTR South Western Trains Limited and others  CAT 31.
 Rachael Kent v Apple Inc and Apple Distribution International Ltd  CAT 28.
 BT v Le Patourel  CAT 30.
Gutmann v First MTR South Western Trains Limited and others  CAT 31, paragraph 176.
 Consumers’ Association v Qualcomm Inc  CAT 20.