Driving with the handbrake on: competition class actions under the
Consumer Rights Act 2015
Andrew Higgins
*
This paper examines the new class action procedure for competition cases established by the Consumer
Rights Act 2015. It examines whether the legislation and the procedural rules for the Competition Appeal
Tribunal address the failures of previous procedures, focusing on three issues in particular i) the treatment of
conflicting interests amongst class members ii) the rules on certifying collective proceedings; and iii) rules on
funding. It argues that while the Act is a considerable improvement on what preceded it, the safeguards
adopted will act as a drag on meritorious and unmeritorious claims alike, and as such there is likely to be
continued under-enforcement of competition law.
INTRODUCTION
In March 2015 the UK parliament passed the first opt-out class action procedure in English
law, specifically for competition cases before the Competition Appeal Tribunal (Hereafter
CAT or ‘the Tribunal’). The procedure is set out in Schedule 8 of the Consumer Rights Act
2015 (supplemented by new rules of procedure for the CAT
1
), which amends the relevant
parts of the Competition Act 1998 and the Enterprise Act 2002.
2
The Act contains several
features considered essential if victims of competition law breaches are to obtain collective
redress. It permits opt-out damages actions to be brought directly by an (alleged) victim of
a competition law breach, on behalf of similarly situated persons, either to establish liability
or in a ‘follow on’ action where an authorised body has already made a finding of liability.
It also permits the Tribunal to make an aggregate damages award to the class, ie to award
damages without undertaking an assessment of damages recoverable by each individual
class member. Despite strong opposition to class actions amongst business lobby groups,
and concern about the spectre of ‘US style’ litigation, the Government pressed ahead with
the reforms partly because it considered ‘the current system of collective redress does not
work’.
3
On the other hand, the Government introduced ‘safeguards’ into the new class
*
Associate Professor in Civil Procedure, Faculty of Law and Mansfield College, University of Oxford. The
author would like to thank Adrian Zuckerman and the two anonymous referees for their comments on this
article. The usual disclaimers apply.
2
action procedure,
4
including a strong certification process, a prohibition on exemplary
damages and a prohibition on damages based agreements in opt-out class actions.
The design of the new procedure reflects the Government’s desire to balance the need
to make collective redress available and viable in a wider range of cases and avoid abuse of
the system.
5
The legislation has been called a ‘third generation’ statute designed to
incorporate the lessons learnt from other jurisdictions with opt-out class actions including
the United States, Australia and Canada.
6
A number of aspects of the new class action procedure merit detailed review
including the role of alternative dispute resolution, and how the Tribunal should exercise its
power to award aggregate damages. However, this article focuses on three issues: the
treatment of conflicting interests between class members, the certification criteria for class
actions and the rules on funding The article’s central claim is that while the new procedure
is a welcome improvement on existing mechanisms, the success of the reforms will require
a change in judicial attitudes as to the types of disputes that are suitable for collective
resolution, and would benefit from further legislative refinement. The procedure is
ambiguous on the treatment of class conflicts that proved fatal to previous procedures, and
the ‘safeguards’ built into the system are likely to deter both meritorious and unmeritorious
claims. In this regard it is unfortunate that some of the key lessons of Lord Justice
Jackson’s landmark costs review in 2009
7
have not been incorporated into the design of the
new procedure.
1
Competition Appeal Tribunal Rules 2015, Part V, ‘Collective Proceedings and Collective Settlements’.
2
Consumer Rights Act 2015, sched 8 ‘Private Actions in Competition Law’. All references in this article to
‘the Act’ are references to the Competition Act as amended.
3
Department for Business Innovation and Skills (BIS), Private Actions in Competition Law: A Consultation
on Options for Reform: Government Response (London: BIS, 2013) at [5.12].
4
ibid, at [5.13].
5
BIS, Private Action in Competition Law: A Consultation on Options for Reform (London: BIS, 2012) 30-31.
6
Presentation by Professor Rachael Mulheron, ‘Consumer Rights Act 2015 - The UK Class Action: A
Reaction’ at the British Institute of International and Comparative Law, 21 April 2015.
7
R. Jackson, Review of civil litigation costs: final report (London: TSO, 2009).
3
BACKGROUND AND MAIN FEATURES OF THE NEW CLASS ACTION
PROCEDURE
The value of collective action in litigation is generally well understood. Joining forces with
others in the same predicament can lead to much more effective use of resources and
economies of scale, and help provide individuals and businesses with effective redress for
claims that would not otherwise be viable. Effective private enforcement can complement
public enforcement, thereby promoting greater levels of compliance if one accepts the
empirical assumption that compliance rates are at least partly influenced by the probability
of enforcement of the relevant standard. As the Office of Fair Trading stated in its
submission on the Government’s Consumer Rights Bill:
If a greater number of well-founded opt-out actions are brought, incentives to comply with
competition law will be increased, which would strengthen the role of private actions as a
complement to public enforcement (which cannot deal with all infringements), delivering
productivity and competitiveness to the UK economy. Moreover, we consider that it is inherently
unfair to businesses who comply with the law that businesses in breach of the law are able to retain
the gains from their unlawful behaviour rather than having to pay compensation. To this extent, a
greater incidence of redress being provided by infringing businesses should create more of a level
playing field between businesses.
8
Collective redress also offers benefits to defendants, allowing them to draw a line under
their liability for past events, and avoiding the cost and the vexation of having to defend the
same allegations in multiple actions. From the perspective of the administration of justice,
collective redress procedures help the court save valuable public resources and avoid
inconsistent judgments.
Notwithstanding the general consensus about the value of collective redress, in
England there has been a lively debate concerning the optimal procedures for collective
actions. The debate has partly been driven by fears of introducing the excesses of ‘US style’
litigation. US style litigation is, of course, not a technical term, but used pejoratively to
describe certain aspects of US constitutional, procedural, and substantive law including
opt-out class actions, contingency fees, jury trials and the availability of punitive damages.
8
Office of Fair Trading (OFT), Submission on Consumer Rights Bill 2013, 55.
4
This ‘toxic cocktail’ of factors – a term even employed by the European Commission
9
- is
said to facilitate class actions by entrepreneurial lawyers in which consumers gain little,
lawyers generate substantial fees and defendants are forced into settling cases, or run the
risk of large damages awards, over relatively trivial breaches. In turn this fosters a litigious
society. In 2001 Lord Steyn wrote extra curially that:
There is also an unarticulated but nevertheless real conviction among judges that we must not allow
our social welfare state to become a society bent on litigation. The introduction of US style class
actions cannot but contribute to such unwelcome developments in our legal system. In my view the
newly referred ‘2000’ model of Group Litigation Orders is at present adequate for our purposes.
10
This conviction, while far from universal, is widely shared by European business lobby
groups,
11
lawyers and politicians. In 2012 the European Parliament passed a resolution on
collective redress calling for a horizontal legally binding framework, but declared that
Europe must not copy the US approach.
12
The European Commission’s subsequent
recommendations on principles for collective redress stated that damages claims should be
constituted on an ‘opt-in’ basis with the express consent of class members.
13
The UK
Government’s decision to permit class actions in competition cases departs from the
European Commission’s recommendations in two key respects. First, it represents a
conscious decision to proceed with class actions on a sector by sector basis rather than a
generic approach recommended by the EC. The Civil Justice Council had similarly
9
European Commission, Press Release, ‘Green Paper on Consumer Collective Redress – Europe’ Memo-08-
741, 27 November 2008 at europa.eu/rapid/press-release_MEMO-08-741_en.htm (***date last accessed).
See also L. Rickards, US Chamber of Commerce Institute for Legal Reform ‘Toxic Cocktail of Class Actions’
5 September 2014 at http://www.instituteforlegalreform.com/resource/ilrs-lisa-rickard-pens-article-on-the-
toxic-cocktail-of-class-actions-brewing-in-australia) (***date last accessed).
10
Foreword to C. Hodges, Multi-party Actions (Oxford: OUP, 2001) iii.
11
Eg, the European Justice Forum: www.europeanjusticeforum.org (last accessed ***).
12
‘Towards a coherent European approach to collective redress’ 2 February 2012, P7_TA(2012)0021.
13
Commission Recommendation of 11 June 2013 on ‘Common principles for injunctive and compensatory
collective redress mechanisms in the member states concerning violations of rights granted under Union Law’
2013/396/EU, Recommendation 21. For a critique of the EC’s argument that ‘opt-in’ rules respect individual
autonomy see A. Higgins and A. Zuckerman, ‘Class Actions in England? Efficacy, Autonomy and
Proportionality in Collective Redress’ (2013) University of Oxford Legal Research Paper No 93/2013 at
http://ssrn.com/abstract=2350141 (last accessed***).
5
recommended the adoption of a generic opt-out procedure in 2008 but this was rejected by
the Government.
14
Successive UK governments have harboured concerns about the adverse
economic and other impacts of a generic opt-out procedure, although these impacts have
not been fully articulated beyond reference to the risk of abuse.
15
On the other hand, the
competition class action procedure goes beyond the EC’s recommendations by allowing
opt-out and not just opt-in class actions. The UK Government could rightly point to
administration of justice considerations that warrant the use of opt-out class actions, in
particular the need to make low value claims economically viable and to maximise
recovery on behalf of victims.
16
To date UK governments have recognised a need for opt-
out class actions in two sectors, financial services and competition cases. In 2009 the
Labour Government introduced a bill into parliament that incorporated an opt-out
procedure for financial services claims.
17
The bill reached the Third Reading stage in the
House of Lords, however the class action procedure was dropped from the bill shortly
before the 2010 general election, as the Government sought to get as much of its legislation
passed as possible prior to the dissolution of Parliament.
18
In 2012 the Coalition
Government acknowledged that there may be a need for an opt-out class action procedure
in competition cases,
19
and, following a public consultation, committed itself to reform. The
14
Civil Justice Council, Improving Access to Justice Through Collective Actions Final Report November
2008, Executive summary, 17; Ministry of Justice, The Government’s Response to the Civil Justice Council’s
Report: ‘Improving Access to Justice through Collective Actions July 2009.
15
BIS, Private Actions in Competition Law n 5 above at [5.4].
16
ibid; BIS, Private Actions in Competition Law: Government Response n 3 above, 30. This is compatible
with the EC’s recommendation, as it recognises that in some cases opt-out procedures might be justified
(Recommendation 21) no doubt partly because a number of EU jurisdictions already permit opt-out class
actions, including Portugal, Spain and Denmark.
17
The bill followed a report of the Treasury, Reforming financial markets Cm 7667 (July 2009).
18
The Financial Services Bill 2009, Bill 6 09-10. See Hansard HC col 1242 8 April 2010 (Ian Pearson,
Economic Secretary to the Treasury: ‘the Government have agreed with the official Opposition through the
usual channels and in the usual way which parts of the Bill should be enacted’, and collective actions were a
‘casualty of that process’).
19
BIS, Private Actions in Competition Law n 5 above, section 5. The policy process followed earlier reports
on reform by BIS and its predecessor departments (eg, in November 2009 the Department of Business,
Enterprise and Regulation Reform published a research report on competition cases under the class action opt-