UK: Damages: A Class Act to Follow?

Last Updated: 9 July 2007
Article by Guy Lougher

Which?, the former Consumers' Association, is bringing the UK's first representative action for damages against JJB Sports (JJB) on behalf of consumers who purchased football shirts at cartelised prices in 2000-2001. This action, under the Competition Act 1998, follows the Office of Fair Trading's (OFT) infringement decision in 2003 against JJB, Umbro, Manchester United and other retailers of replica England and Manchester United football shirts.

In the claim, which was lodged on behalf of 130 consumers earlier this year with the Competition Appeal Tribunal, Which? is seeking compensation for each overpriced shirt purchased, whether from JJB or another retailer, together with costs, interest and exemplary damages equal to 25% of JJB's turnover. JJB therefore faces the possibility of further financial penalties, having already paid out Ł6.7 million in fines.

The other cartel participants appear, however, to have escaped damages claims as the two year limitation period expired prior to Which? achieving its status as a body designated to bring actions on behalf of consumers (JJB appealed the initial decision, which had the effect of extending the limitation period in respect of JJB only).


The OFT's current consultation on private actions in competition law and the European Commission's Green Paper both seek to address the current obstacles to private actions, which are seen as necessary to complement the enforcement powers of the competition authorities.

Whilst the risk of damages actions has long been a theoretical one for companies found to be in breach of competition law, the JJB case highlights that consumers, and the organisations representing them, are now more likely to take action. The current focus on damages actions may also lead companies to consider claiming damages from their suppliers if they have been paying higher prices as a result of cartel behaviour.

As with all litigation, defendant companies should keep in mind the possibility of reaching a settlement out of court, thereby hopefully reducing costs and the amount of any compensation payable. Indeed, in the current case, Which? has indicated that the next stage of the proceedings has been postponed until June 2007, pending negotiations with JJB.

Virgin Media sues BSkyB

Virgin Media has issued proceedings against BSkyB (Sky) in the High Court on the basis of Sky's alleged abuse of a dominant position in the market.

Virgin's case is that Sky has a dominant position in the market for pay TV because it has control of popular channels such as Sky One and Sky News. Certain of Sky's channels were licensed to Virgin's cable service, but when the deal came to be renegotiated this year, Sky asked for more money which Virgin refused to pay and, on 1 March, Sky's channels were withdrawn.Virgin is arguing that the price increase was an abuse of Sky's dominant position, in breach of European competition law.

Following the price increase demanded by Sky, several parties, including Virgin, asked Ofcom to investigate. Ofcom announced that it would conduct a market study into the PayTV market as a whole and decide whether to make a reference to the Competition Commission for an in-depth market investigation.

Practical implications

It is possible that Sky will seek to have the court proceedings stayed pending the outcome of Ofcom's market study.

The allegation of excessive pricing faced by Sky was considered in the recent case, Attheraces, which concerned the fees charged by the British Horseracing Board (BHB) to an overseas betting company for information about horse races. The Court of Appeal (CA) found that BHB was dominant but was entitled to charge high fees because of the value to third parties of the information supplied. The CA said that it would only interfere with a contract where it could be demonstrated that the price could result in serious consumer detriment, but that this would not be the case where the price merely reflected the economic value to the customer. In this case, it is therefore possible that Sky will argue that the channels at issue are ones with great value to Virgin Media and its customers and the price is therefore not excessive in light of that value.

CC airport investigation takes off

Following its study of BAA's ownership of various airports in England and Scotland, the OFT has referred the market for the supply of airport services by BAA in the South East of England to the Competition Commission (CC), for a detailed market investigation. The OFT's view is that the airports operated by BAA may suffer from a lack of competition.

The CC has indicated that it will run the OFT's reference and a reference made by the Civil Aviation Authority in parallel, with Christopher Clarke chairing both enquiries. The CC has said that although it has a two year deadline within which to conclude its investigation, it hopes to complete it in a significantly shorter time. At the same time, the Civil Aviation Authority has put forward proposals to release Manchester Airport from price regulation.

OFT to undertake study of retail bank pricing

The OFT has announced that, following a fact finding study undertaken last year, it will conduct an in-depth study of retail bank pricing during 2007. The OFT considers that the issue of bank current account charges raises wider concerns about competition and transparency of pricing and impacts on all bank customers. It therefore intends to examine the fairness of bank charges in the wider context of competition in the UK retail banking sector.

If the OFT discovers anti-competitive conduct by any market participant, it may commence a Competition Act investigation. Alternatively, if it finds there are features of the market as a whole which restrict competition, it may instead make a market investigation reference to the Competition Commission. The OFT may also make recommendations for changes to the industry, or use its consumer enforcement powers to address any identified problems. This follows on from the OFT's investigation in the payment systems sector.

PPI Market Investigation proceeds with CC's Issues Statement

The Competition Commission (CC) has published a Statement of Issues in relation to the supply of various types of payment protection insurance (PPI) to nonbusiness customers.

The Statement of Issues identifies the areas the CC intends to investigate in order to determine whether any feature of the market restricts competition. Issues, including customer behaviour, costs and competition between providers, will be considered from a retail and a wholesale perspective. The relationship between these different levels of the supply chain will also be examined. Following a series of hearings with various interested parties, the CC will then publish its 'Emerging Thinking' in Autumn 2007.

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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