Guest post by Laura Whyatt, a litigation partner in Dentons’ Competition and Foreign Investment group
Whyatt: Extended regime would help claimants and defendants
Last month, the Law Commission launched a new project to “consider the potential introduction of a consumer class actions regime” in England and Wales – 11 years after the UK collective actions regime for competition claims was first introduced.
If adopted, the consumer-focused regime could expand opt-out class actions beyond the current competition claims heard in the Competition Appeal Tribunal (CAT).
This review is timely in view of the recent overhaul of consumer law enforcement in the Digital Markets Competition and Consumer Act, which gives the Competition and Markets Authority direct powers to fine companies up to 10% of their annual global turnover for breach of consumer law.
It may also resolve some of the problems that have beset the competition collective actions regime since its introduction.
Envisioned as a means of providing access to justice on a group basis for people with low-value individual claims against companies who had breached competition law, the past 11 years have seen the CAT regime attract novel claims for eye-watering amounts that overstretch the bounds of the competition framework.
Conduct which may give rise to issues of consumer protection, data protection or environmental concerns has been re-framed as competition breaches to take advantage of the CAT’s opt-out collective actions regime.
These advantages, versus individual actions, are that everyone affected is automatically included in the class, and damages can be sought on an aggregate, class-wide basis without the need to prove individual loss.
Claimant lawyers and litigation funders, essential in enabling collective actions, saw an opportunity for potentially significant returns from any damages not distributed to the class.
However, this overreach has been damaging and claims are failing. To date, five claims have gone to trial; the class has won in one, two settled and two failed.
The courts are at risk of becoming overburdened with cases that are unnecessarily complex, lengthy and expensive, as claimants need to prove their claim against a competition law framework.
Claims that are potentially meritorious were they to be addressed within their proper legal frameworks, such as consumer protection law, are failing because they are not competition law breaches.
Meanwhile, little of the damages are being returned to the class.
The Law Commission’s initial scoping questionnaire points to these shortcomings, seeking views on how a new consumer regime would ensure that redress reaches affected consumers, litigation could be conducted efficiently at proportionate cost, and speculative claims avoided.
Abuse of the opt-out collective proceedings system also makes settlement more difficult.
Any proposed resolution must be approved by the CAT as just and reasonable. No liability settlements, where money is paid out by a company without admitting fault, are possible but it is unattractive to settle a claim for significant sums for a breach not committed.
Further, headline claim values in these collective actions often bear no relation to the actual losses suffered or the amounts likely to reach the class.
It is not in the interests of consumers or businesses for the regime to carry on in this way and it will stifle if litigation funders become hesitant.
The CAT is tackling some of the concerns through its jurisprudence: recently, judges refused to grant a collective proceedings order in a consumer claim seeking damages caused by an alleged salmon production cartel because the costs budget exceeded £20m, when the potential compensation to consumers was estimated to amount to less than £10 each, and there was no clear plan as to how those small amounts would actually be distributed to the affected class.
Expanding the regime beyond competition law infringements, as is being considered, could alleviate some of these issues.
It would avoid distortion between the availability of redress to those harmed by competition law infringements and those affected by breaches of other laws.
It would also balance the availability of redress and a defendant’s rights of defence by allowing the defendant’s conduct to be tested within the proper legal framework. This in turn could facilitate settlement.
For certain cases, it may also mean redress is available more quickly and cheaply because claimants would not need to prove all the facets of a competition law claim.
This would be to the advantage of claimants and defendants.
The deadline for responses to the initial scoping questionnaire is 30 October, with further work on the Law Commission’s project expected in the autumn.
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