United Kingdom: Class actions – litigation, policy and latest developments

On 1 October 2015, a collective or class action procedure for breaches of competition law was introduced in the United Kingdom 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 year 2023 has been important for this collective regime, as the volume of certified claims has continued to grow and increasingly creative claims have been brought, while certain cautionary notes regarding the limits of the regime have been sounded.

As a starting point, claims can be brought by a class representative on an ‘opt-in’ or ‘opt-out’ basis and may be stand-alone or follow-on. All prospective claims must go through a certification process where the CAT decides if it should make a collective proceedings order (CPO) so that the claim may proceed. This certification process (which is addressed in more detail below) is therefore a crucial step in the procedure and involves an assessment by the CAT of:

• whether the claims are eligible for inclusion in collective proceedings;
• whether the proposed class representative is suitable;
• the description of the class of persons whose claims are eligible for inclusion; and
• 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).

For completeness, aside from the CPO regime, collective redress is also potentially 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 orders (GLO): a court order providing for the joint case management of claims that 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 convinced 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 19: 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.

These mechanisms are seldom successfully used for competition claims, however, and the rest of this chapter therefore focuses on claims brought under the CPO regime.

Competition authority findings and EU court decisions

Decisions of the Competition and Markets Authority (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 these decisions when deciding cases and the decisions are likely to have significant evidential weight.

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 acting 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, in Le Patourel v BT where provisional findings by Ofcom were accepted as prima facie evidence of excessive pricing.^[1]

Anticompetitive behaviour suitable for collective actions

The most ‘traditional’ form of collective action is a follow-on claim (or part follow-on claim) where a regulator has found that a party engaged in anticompetitive behaviour with widespread impact. Although some parties may choose to issue individual proceedings against the infringer, where the value of individual claims is insufficient to justify individual actions, a collective action may be more suitable for those parties.

However, collective actions are not limited to follow-on actions and stand-alone collective actions before the CAT have become common, in which the class representative must prove the competition infringement in addition to establishing causation and loss, on behalf of the class. Class representatives are getting more creative in arguing that claims involving consumer rights and data privacy arise from an abuse of dominant position and therefore fall within the CPO regime. To date, the CAT has been reluctant to definitively rule out prospective collective actions as falling outside of their jurisdiction in such cases, and has tended to give proposed class representatives chances to fix problems identified with their claims rather than immediately refusing to certify them. By way of example of some of the creative ways that class representatives and proposed class representatives have sought to use the regime, the CAT has granted CPOs in relation alleged abuse of dominance in failing to make certain types of rail tickets sufficiently available and proceedings have recently been issued alleging that purported failures to report discharges of wastewater by water companies constitute an abuse of dominance causing actionable loss to certain water consumers.^[2]

Bringing a claim

Collective proceedings for breaches of competition law may 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 as an initial step and cannot proceed further if certification is refused.

A CPO will only be granted where the CAT considers that it is ‘just and reasonable’ for the class representative to act for the class members, and that the claim in question is ‘eligible’ to be brought on a collective basis.

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, experience shows that 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.^[3]

Certifying a class

In certifying claims as eligible for inclusion in collective proceedings, the CAT will consider whether the claims are:

• brought on behalf of an identifiable class of persons;
• raise common issues; and
• 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 nature of the class;
• if it is possible to determine with certainty whether a given person is a member of the class; and
• whether the claims are suitable for an aggregate award of damages.

To date, the CAT has considered the certification of prospective collective actions at hearings (which typically last several days and are usually contested), as opposed to on paper. Although the defendants to the prospective collective action are likely to resist the certification of the class, or at least argue that the scope of the claim or class should be limited, it is also important to recognise the CAT’s role as gatekeeper to collective proceedings. It is the CAT’s role to find ‘an appropriate balance between the right of the class to seek vindication and the right of defendants not to be subject to a top-down claim unless it is a proper one to proceed’.^[4] This balancing act has been apparent in how the CAT has approached recent certification decisions. Following the Supreme Court’s landmark decision in Merricks,^[5] the CAT appeared to have set a very low bar for claimants seeking certification and a number of collective actions considered shortly thereafter were certified while only one was provisionally refused,^[6] with the CAT expressly offering a very permissive approach. In a possible signal of a shift in approach, this year the CAT has refused to grant a CPO in a high-profile claim against Meta because of deficiencies in the prospective class representatives’ expert’s evidence supporting their proposed methodology.^[7] The CAT has since declined to certify other collective actions against Visa and Mastercard after finding a ‘long list of defects’ in the proposed class representative’s applications.^[8] However, in both instances, the CAT has not dismissed the proposed collective actions but stayed them to give the proposed class representatives an opportunity to amend their cases and file further evidence in support of certification.

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. The 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 collective 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.

Settling claims

Settlement of collective actions is possible under the CAT’s collective actions regime. The CAT must approve any collective settlement for certified opt-out proceedings and opt-in and opt-out proceedings that have yet to be certified. For certified opt-out proceedings, the CAT will consider if the proposed settlement terms are ‘just and reasonable’, having regard to a number of factors including:

• the amount and terms of settlement;
• the likelihood of a higher amount being awarded at trial; and
• the likely cost and duration of trial.

Before the CAT considers if the terms of the settlement are ‘just and reasonable’ for collective actions that have not yet been certified, it will first need to 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’s settlement procedures are as yet untested, and it is unclear how it will manage the process in practice. Settlement is a crucial part of any litigation mechanism and if it becomes an unduly difficult process before the CAT then this may dissuade parties from seeking to reach compromises and from pursuing collective actions altogether. Parties engaging in the CPO regime will hope to see the CAT take a light touch approach to assessing proposed settlements.

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. 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. To date there has not been a significant uptake of the voluntary redress process.

Right to appeal

Appeals against final determinations of the CAT in collective action proceedings can be made to the Court of Appeal. Permission is required and appeals are only possible on points of law.

Although there is no statutory provision for appeals against the CAT’s decision on granting a CPO, Court of Appeal decisions in Merricks and subsequently Evans have confirmed that a ruling by the CAT on the certification is a decision over which the Court of Appeal has jurisdiction.^[9]

Other strategic considerations

The UK collective action regime is young but quickly maturing, and at present no cases have been litigated through to a final judgment or a settlement. The most important developments over the past 12 months include the following.

• Funding – in Paccar, the Supreme Court found that litigation funding agreements that entitle funders to payment based on the amount of damages recovered (which almost all funding agreements were) are damages-based agreements.^[10] Damages-based agreements are banned in opt-out claims and are unenforceable for opt-in claims unless they follow the prescribed form set out in the applicable regulations. Litigation funding is a necessary feature of collective actions, given the cost of bringing a claim and the lack of direct funding from the class, and the funding structure successfully challenged in Paccar is commonly used in these collective actions. The Paccar ruling has therefore created some uncertainty over existing and future collective proceedings. Over the next year it is likely that many funding arrangements will be amended and challenged as the interested parties test this developing area of law, and the jurisprudence is certain to develop further. Moreover, the UK government has acknowledged that it is monitoring the developments resulting from Paccar and considering its next steps^[11] – we consider it likely that the government will intervene to bring greater clarity via legislative reform and that this legislative reform will be relatively permissive of litigation funding.
• Competing collective actions – it is becoming increasingly common for more than one proposed class representative to seek certification of a collective action against the same defendants for the same or closely related causes of action. The CAT is becoming increasingly flexible in how it manages ‘carriage disputes’ between proposed class representatives. While it had previously considered which of the competing collective actions should proceed at the certification hearing, the CAT has since ordered a preliminary hearing in advance of the certification stage to decide a carriage dispute in a proposed collective action against Alphabet and Google.^[12] When it comes to deciding carriage disputes, the Court of Appeal has made it clear that this is a discretionary evaluation by the CAT that will be difficult to overturn on appeal.^[13] The CAT will need to consider a variety of factors relevant to who could best conduct the proceedings and its decision should not be made on the basis of who was first to file, who has the largest amount of funding or which claim covers the broadest class.^[14]

• Seeking strike-out – 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 certification stage, rather than the substantive stage – for example, in the Gutmann,^[15] Apple^[16] and Le Patourel^[17] cases 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. Even in cases where the CAT did not certify a collective action (such as the claims against Meta, Visa and Mastercard), the CAT has chosen not to strike out the claims but to give the class representative an opportunity to improve their case. 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 focusing on challenging the methodologies proposed by the prospective class representative and seeking to narrow the scope of the claim or the scope of the class, while reserving their rights to pursue later strike-out or summary judgment applications.

Notes

^[1] Justin Le Patourel v BT Group PLC [2021] CAT 30.

^[2] Justin Gutmann v First MTR South Western Trains Limited and Another [2021] CAT 31. See: https://www.leighday.co.uk/news/news/2023-news/first-environmental-collective-action-claim-launched-on-behalf-of-millions-of-customers-overcharged-by-water-companies/.

^[3]    David Courtney Boyle v Govia Thameslink Railway Limited and Others [2021] CAT 19.  

^[4]    Justin Gutmann v First MTR South Western Trains Limited and Others [2022] EWCA Civ 1077.

^[5] Walter Hugh Merricks CBE v Mastercard Incorporated and Others [2020] UKSC 51.

^[6]    Michael O’Higgins FX Class Representative Limited v Barclays Bank PLC and Others [2022] CAT 16.

[7] Dr Liza Lovdahl Gormsen v Meta Platforms, Inc and Others [2023] CAT 10.

^[8] Commercial and Interregional Card Claims I Limited v Mastercard Incorporated & Others [2023] CAT 38.

^[9] Merricks v Mastercard Inc [2018] EWCA Civ 2527 and Mr Phillip Evans v Barclays Bank PLC and Others [2023] EWCA Civ 876.

^[10]   R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28.

^[11]   ‘The Department is aware of the Supreme Court decision in Paccar and is looking at all available options to bring clarity to all interested parties’, Department of Business and Trade statement published on 31 August 2023.

^[12]   Claudio Pollock v Alphabet Inc and Others [2023] CAT 34.

^[13]   Evans v Barclays Bank PLC and Others [2023] EWCA Civ 876. 

^[14]   Ibid.

^[15]  Gutmann v First MTR South Western Trains Limited and Another [2021] CAT 31.

^[16] Dr Rachael Kent v Apple Inc and Apple Distribution International Ltd [2022] CAT 28.

^[17] BT v Le Patourel [2021] CAT 30.