Britannia rules in favour of new competition class actions regime
From 1 October 2015, the UK’s competition class actions regime will be significantly reformed when the Consumer Rights Act 2015 (UK) (“CRA”) comes into force.
The CRA introduces an opt-out class actions regime for consumers and businesses in competition proceedings arising under UK or EU law. In addition, the Competition Appeal Tribunal Rules 2015 (UK) specifically envisage “sub-classes” within a class.
It is intended that the new regime will encourage potential claimants to seek redress, given that previously the cost of proceedings often outweighed any amount claimed. The reform was brought about following widespread commentary in relation to the perceived ineffectiveness of the previous regime. Only one class action was ever commenced under the previous regime. However, we note that the new regime does not remove the “loser pays” rule, under which claimants are exposed to adverse costs orders in the event their claim does not succeed.
Class actions under the new regime will be heard by the Competition Appeal Tribunal (“CAT”), which will be able to certify claims as eligible for inclusion in a class action if it considers that they “raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings”. The CAT may also order that simpler proceedings be subject to a “fast-track procedure”, which sets a six-month deadline for the commencement of the final hearing.
When determining which claims are suitable to be brought as a class action, the CAT will consider:
- whether it is possible to determine, for any person, whether they are or are not a member of the class;
- the size and nature of the class; and
- whether the claims are suitable for an aggregate award of damages.
Previously, the CAT was only able to hear cases that followed on from decisions of the UK Competition and Markets Authority or the European Commission.
The new regime also introduces two innovations of particular significance in relation to damages:
- the CAT may order that all or part of any damages not claimed by class members are instead to be paid to the representative claimant of the class in respect of all or part of the costs or expenses incurred by the representative in connection with the proceedings; and
- the CAT will have the power to “make an 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”. Such assessments of individual losses are proving a significant burden and hurdle in the ongoing Emerald air cargo litigation and this amendment is likely to significantly facilitate the assessment of damages in cases before the CAT.
It will be interesting to see monitor whether the new regime does in fact lead to an increase in the number of competition class actions in the UK, or whether the maintenance of the “loser pays” rule continues to have a deterrent effect.
Meanwhile, in Australia it is clear that class actions are on the rise and are increasingly being supported by third party litigation funders. Read more about this in our report The Review: Class Actions in Australia 2014/2015.
Photo credit: Flickr / victorianlondon