How have UK litigation procedures changed to tackle the consequences of anti-competitive behaviour
The UK legal system has been surprisingly slow to follow in the footsteps of the US and provide workable processes for consumers to group together to hold companies to account for anti-competitive behaviour. Such US class actions are an established part of the risk landscape and serve to influence and restrain the worst behaviour of companies. However, litigation procedures in the UK are beginning to change to enable certain types of group or mass actions to be brought under specific circumstances.
For consumers, changes enacted in the Consumer Rights Act 2015 have enabled such mass claims. Consumers can now seek redress for losses arising from breaches by companies of EU or UK competition law on a combined “opt-out” basis. This starting premise, that the entire class of those affected are automatically included in the mass action, means that obtaining individual affirmations, which can be lengthy and arduous process, does not need to be done in advance. This brings efficacy and speed to enabling mass action suits.
However, the necessary trigger for such claims is a prior finding of liability – it must come from a preceding breach of EU or UK competition law. In the case of Merricks vs Mastercard, Walter Merricks, a former Chief Ombudsman of the Financial Ombudsman Service, brought a claim under the new process. Merricks, as the proposed “class representative”, sought redress from Mastercard for losses (estimated at £14Bn) suffered by all UK consumers who used Mastercard to pay for transactions in the 16 year period from 1992 to 2008. The European Commission held in 2007 that Mastercard’s interchange fees were anti-competitive, and ultimately led to higher prices being charged to consumers.
Looking at the process in a little more detail, to bring a claim on behalf of all affected consumers (the class) an application for a Collective Proceedings Order (CPO) must be submitted to the Competition Appeal Tribunal (CAT). The CAT will then consider whether to certify the CPO and allow the claim to proceed. In this case, the CAT refused to grant Merricks a CPO on the basis of perceived difficulties to estimate aggregate damages, proving that the fees resulted in higher costs for consumers, and estimating losses suffered by each individual.
The case made its way to the Supreme Court which provided crucial guidance on the standard to be applied. It emphasised that difficulty in quantifying or apportioning losses should not preclude a claim being heard and that the “suitability” of aggregate damages should be treated as a factor, not a hurdle. This means that establishing effective and pragmatic processes to deal with these data and damages challenges is an important part of both bringing and defending such claims. Future consumer claims will very likely also feature large numbers of claimants and substantial volumes of transactions.
The opening of the door to large-scale claimant classes in the UK inevitably brings huge challenges to companies who are required to deliver restitution to consumers that that have been found to suffer harm. The UK Foreign Exchange Cartel Claim is another example that is moving through the courts. Once a claim has been accepted, the challenge moves from one centred on distinct legal arguments to one that involves the management and interpretation of huge volumes of data. The skills required are specialised and companies will need to ensure that they obtain the right assistance so that their ongoing operations are not adversely affected by the distraction.
The practical effects of mass action claims in the UK will ultimately only be properly understood as they are tested in court. Recent cases such as these are to be welcomed and are of significant importance, providing landmark rulings which could change the UK litigation landscape.