UK: New UK Consumer Rights Act Has Implications For Private Damages Actions In Competition Law

The new Consumer Rights Act 2015 ("CRA") adopted on 26 March 2015 will introduce significant changes to the private enforcement of competition law in the UK. The CRA is expected to enter into effect by 1 October 2015 and, according to the UK government, represents some of the most significant reforms concerning consumer law to be enacted within a generation. This reform has serious implications for private actions involving breaches of competition law by expanding the powers of the Competition Appeal Tribunal ("CAT") and introducing new procedures for collective proceedings and collective settlement. These developments further demonstrate how the UK regulator is aiming to crack down on anti-competitive behaviour.

Expanding the powers of the CAT

The CRA provides for the expansion of the jurisdiction and the powers of the CAT, which is expected to have the effect of turning the UK's specialist antitrust court into a first-class competition court of preference. UK courts in general have long been favoured as a jurisdiction for competition claims due to their favourable disclosure rules as well as their willingness to assert jurisdiction. However, barriers were in place for competition claimants looking to bring 'stand-alone cases', where the High Court was the only viable venue – as the CAT did not have statutory authority to hear such cases. The current reform aims to thereby improve claimants' access to remedy through the following means:

Hearing 'stand-alone cases': The CAT will be able to adjudicate on 'stand-alone cases' (i.e., damages actions where there has been no finding of infringement by a competition authority against the defendant) as opposed to the current limited system of hearing 'follow-on actions' only. Following the reform, the CAT will have jurisdiction to hear stand-alone and follow-on claims, as well as cases involving both.

Implementing a 'fast-track': A new fast-track procedure will be introduced by the CAT, allowing for simpler cases (i.e., those involving less cost and evidence) to be resolved more expediently. This reform is meant to enable SMEs to bring private actions against larger corporations whose behaviour has been alleged to be anti-competitive and in breach of competition rules.

Granting injunctions: The CAT will be able to issue injunctions, providing claimants' with immediate relief by requiring cessation of anti-competitive conduct. This reform will be particularly useful for 'fast-track' cases, where the scope for relief will be considered early on in the process. This approach broadens the powers of the CAT from its current ability to award damages only.

Extending the limitation period: The CRA aligns the limitation period for bringing claims before the CAT with those applicable to bringing a civil claim before the High Court, i.e., six years from the date on which the cause of action accrued.

Collective actions and settlement

The CRA introduces new procedures for collective actions and collective settlement, as well as a redress scheme. The object of the reform is to provide prospective claimants with effective means to enforcement. However, broadening the scope of collective actions has caused some commentators to worry that the UK could be headed in the direction of US-style class actions. To avert such concerns, the CRA provides for safeguards which prohibit damages-based fee arrangements and exemplary damages in collective actions. The new procedures set out as follows:

Implementing 'opt-out' collective actions: The CRA broadens the range of representatives to a private damages action by including anyone (i.e., businesses, individuals or trade associations) directly affected by the alleged infringement, as long as the CAT deems such representatives as 'just and reasonable'. Thus, the effect could be that all UK customers affected by the infringement could be represented unless they actively seek to 'opt-out' of the action. In addition, non-UK customers may 'opt-in' to the action and can therefore be represented before the CAT. This reform is in contrast to the current approach in which a designated body (i.e., the consumer association Which?) must bring a collective damages action before the CAT and affected individuals to a collective action must 'opt-in'.

Increasing damages calculations: The CAT will be able to assess damages on an aggregated basis for the group, as opposed to the current approach which calculates damages on an individual basis as per opted-in claimant. Under this new approach, any awarded damages that are unclaimed within a specified period will either be paid: (i) to a prescribed charity; or (ii) towards a representative's costs as incurred in connection with the proceedings.

Implementing 'opt-out' collective settlement: The CRA provides for the possibility of representatives to collectively settle a case prior to bringing the claim before the CAT, so long as the CAT then deems the terms of settlement 'just and reasonable'. The representatives may negotiate on behalf of all UK claimants (as part of one group) who have not 'opted-out' as well as those non-UK claimants that have 'opted-in'.

Implementing a redress scheme: The CRA provides for the Competition and Markets Authority ("CMA") to authorise voluntary redress schemes whereby companies that have been the subject of an infringement finding – by the CMA itself or the European Commission – may offer compensation in consequence of an infringement decision. In return, the CMA can take account of this form of cooperation when assessing the level of the fine. It is, however, important to note that the scheme will not have the effect of protecting the company in breach of competition rules from being subject to private damages actions.

The changes outlined under the CRA and applicable to private damages actions in competition law are significant. They are expected to have an impact on the number of claims brought before the CAT and the size of damages paid out to claimants. They broaden the horizon of consumer litigation and also ease the way for more business-to-business claims, particularly as SMEs are encouraged to seek redress for harm suffered due to infringing conduct by larger entities.

It should be noted that further reforms will soon be needed to bring UK law into alignment with the EU Directive 2014/104 of the European Parliament and the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (see VBB on Competition Law, Volume 2014, No. 11,available at www.vbb.com). The EU Directive was adopted when the CRA had already been designed and its adoption process was in a final stage. Some aspects of the EU Directive, which will further facilitate private enforcement claims, were thus not covered by the CRA such as amendments to the applicable limitation periods under UK law, the introduction of a rebuttable presumption of harm and additional terms of settlement (i.e., when settling infringers can be asked to contribute to damages, or the size of reductions in damages claims in an action brought against a non-settling party involved in the infringement).

The full CRA can be accessed here: http://www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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