UK: Private Damages Actions In Competition Law: OFT Recommendations To Government

Last Updated: 12 December 2007
Article by Susan Hankey and David Marks

On 26 November 2007 the Office of Fair Trading (OFT) published its recommendations to the Government on how to improve redress for those harmed by breaches of competition law, specifically by facilitating private claims for damages due to breach of competition law. These recommendations factor in responses received to the OFT’s public consultation on this area undertaken in April 2007.

Major issues highlighted in the recommendations include:

  • representative actions (actions on behalf of a number of claimants);
  • funding and costs of claims;
  • the impact of encouraging competition claims on competition authorities’ leniency programmes (under leniency programmes, competition authorities reward whistleblowers for providing cartel evidence by reducing fines which would otherwise be imposed on them);
  • whether joint and several liability between all cartel participants (including leniency recipients) should be maintained;
  • the "passing-on defence" (the argument that no damage occurred as the purchaser of the cartelised items passed on to its customers the increase in price caused by the cartel by charging those customers a higher price) and burden of proof; and
  • whether indirect purchasers should be prevented from bringing competition claims.

As regards representative actions, at present only specified bodies are able to bring such actions and only on behalf of consumers. In addition, these actions must be based on a pre-existing competition law infringement decision ("follow on" claims).

The OFT recommends widening representative claims in competition law to include claims on behalf of businesses. It also suggests allowing representative claims to be brought even where there is no pre-existing competition law infringement decision ("stand-alone" claims). However, it believes that allowing only representative bodies to bring claims should be maintained.

Another important issue is whether representative claims should be "opt-out" (claim brought on behalf of consumers at large, with the option for individuals to opt out of such claim) or "opt-in" (claim brought on behalf of named consumers only).

The OFT favours opt-out claims. It believes they better secure access to justice by reaching more potential claimants and minimising costs and complexities. In order to allay fears of creating a "US style litigation culture", the OFT recommends involving judges in the initial stages. For example, judges should, it believes, be empowered to decide whether actions should be brought on a representative "opt-in" basis or "opt-out" basis or whether individual actions by individual consumers are more appropriate. This could be done at a "permission stage" where the representative body applies to court for permission to bring its action.

As regards funding and costs issues in competition claims, the OFT recommends the Government consult on:

  • the possibility of allowing a percentage increase of more than 100% in conditional fee arrangements in competition cases, subject to judicial supervision of the funding arrangement;
  • giving the courts a discretion to give the claimant costs protection in appropriate cases (representative actions only)
  • whether to introduce a merits-based litigation fund for competition claims for which commercial funding is not available and if so, how the fund should be run.

As regards leniency and liability, the OFT recommends allowing the Secretary of State to provide in legislation that:

  • leniency documents are excluded from use in litigation without the consent of the leniency applicant, this exclusion to apply irrespective of whether the OFT proceeds to an infringement decision;
  • immunity (100% reduction under leniency programme) recipients are not jointly and severally liable with the other members of the cartel. Immunity recipients would then only be liable for the harm they individually caused.

The consultation also questioned whether indirect purchasers should be prevented from bringing damages claims and whether the burden of proof in use of the "passing-on defence" should always lie with the defendant. The OFT noted that these issues are important and complex and decided that these should be progressed in the context of discussions on the forthcoming European Commission White Paper on damages actions for breach of the EU competition rules (due by Easter 2008), rather than making a suggestion of its own.

The OFT also recommends that UK courts and tribunals should be required to have regard to the UK national competition authorities’ (essentially the OFT, Competition Commission and the Competition Appeal Tribunal) decisions and guidance.

The OFT had floated the idea of a Competition Ombudsman but it was felt that this was not necessary at present but should be kept under review.

The OFT’s recommendations indicate where the UK is heading in terms of facilitating private competition law actions. There is an inherent tension between enabling private enforcement to the benefit of consumers and making access to the courts too easy ("opening the floodgates"), raising fears of increased burdens on business eventually feeding down to customers in terms of higher prices. It will be interesting to see on which side the Government places itself in deciding whether to adopt the OFT’s recommendations. Also, how will adopted recommendations stand up to wider scrutiny in the Government consultation procedure? Or will the Government duck the issue and wait for the European Commission’s anticipated White Paper on damages actions (mentioned above)? These decisions will shape the future of competition law enforcement in the UK and, in turn, the UK’s wider litigation culture.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 11/12/2007.

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