United States: Opt-Out Antitrust Class Actions—A U.S. Perspective On The Consumer Rights Bill Pending In UK’s Parliament

Note: This article was adapted from a speech given by Mr. Popofsky1 at the Oxford Centre for Competition Law & Policy in the UK on May 2, 2014.

Will opt-out class actions proposed by the UK Parliament's Consumer Rights Bill bring the dreaded U.S.-style litigation culture to the United Kingdom? My personal assessment—that of a seasoned American antitrust practitioner—is that it's doubtful.

But first, some background. Opt-out class actions are a form of what are known as collective actions or collective proceedings. Such actions are currently permitted in UK and European courts only on an opt-in basis—essentially a form of voluntary joinder—but then only in private claims for redress in the high court that follow on a prior public agency decision of wrongdoing under the competition laws of the UK or EU. Private antitrust actions in the UK are quite rare; only 27 such cases resulted in judgment in the 2005-2008 period. Only one collective action for damages has been brought on behalf of consumers.

The bill before the UK Parliament—denominated the Consumer Rights Bill—is an extensive consumer bill of rights.2 As it relates to competition law, it is designed to make collective actions an important component of antitrust enforcement in UK courts.

The central idea is to provide an avenue for collective redress not only for large claims that might be brought individually, but also for small but meritorious claims that are not, or cannot be, efficiently asserted for various reasons. The vehicle proposed to accomplish this is the opt-out class action, which would have binding effect on all members of an identifiable class who do not opt out after appropriate notice.

The competition law reforms in the proposed statute are threefold:

First, the bill proposes to reform the Competition Appeal Tribunal (CAT)—a court with competition law expertise—by enabling it to hear stand-alone collective actions for the first time in addition to follow-on cases that are based on a public enforcement decision. The CAT would be authorized to award collective damages if considered appropriate. The bill also provides for a fast-track class regime particularly designed for injunction proceedings.

Second, the bill provides for an elaborate alternative dispute resolution mechanism including class-wide settlement procedures.

Third, for the first time, the bill would provide for a controversial opt-out class action procedure that opponents of the legislation—such as the Confederation of Business Industry—contend will inevitably introduce into the UK a supposedly undesirable, U.S.-style litigation culture.

It is the burden of this article to explain why it is unlikely to do so.

Let me commence by describing how the proposed opt-out class action would work. As set forth in the bill now amplified by draft rules proposed by the CAT, claims on behalf of an identifiable class are eligible for inclusion in collective proceedings only if the tribunal considers that they raise the same, similar, or related issues of fact or law and are suitable for collective adjudication.3 The proposed rules specify that the CAT may allow such proceedings in relation to only a part of a claim. For example, in a stand-alone collective action, the tribunal could make a collective proceedings order in relation to the existence of an infringement but leave issues of causation and quantum of damage to be dealt with on an individual basis.

Before the tribunal may issue a collective proceedings order, the proposed rules specify that the tribunal must, among other things, (1) weigh the costs and benefits of using a collective process; (2) consider whether there are any separate or similar claims pending by potential class members; (3) examine the size and nature of the class; (4) consider whether it would be practical to resolve the claim with an aggregate damages award as well as estimate the amount of damages that each class member might recover; (5) determine whether the class representative can respond to any costs it may be ordered to bear; and (6) most importantly, consider the strength of the claims as well as whether it is preferable to certify a class only on an opt-in basis. In this context, it may have to address contentious issues with respect to which entity actually suffered damage from an alleged infringement. For example, direct purchasers from an alleged wrongdoer may claim they have paid an illegal overcharge, but their customers, or perhaps the ultimate consumers, may claim that it is they who were actually damaged since the overcharge was passed on to them. This issue, which is also being considered for legislation by the EU, could yield serious conflict problems for class representatives and their counsel. The potential for such issues arising is implicitly recognized in proposed rules authorizing sub-classes with their own representatives.

The collective redress process would be initiated by a proposed class representative who claims to have been damaged by a competition law infringement or by a third party, such as a trade association or recognized consumer group, if it satisfies the tribunal that it can serve as a just and reasonable fiduciary. If a class is certified, the action may then proceed to a final judgment that is binding on every class member who does not elect to opt out after receiving notice. An entity or consumer not domiciled in the UK may only assert claims on an opt-in basis.

Notice is the linchpin of the procedure. The duty of giving such notice will be the responsibility of the class representative. The form and content of the notice are generally set forth in the proposed rules, but the notice itself and the manner by which it is to be given must be approved by the tribunal. Presumably, where customer lists of allegedly injured parties are readily at hand, direct notice by mail will be feasible. But absent such circumstances, resort to notice by publication may be the only practical option.

In concept, this procedure looks very similar to its U.S. counterpart, which has been actively employed for almost 50 years. But looks can deceive: the opt-out procedure proposed here is avowedly devised to play out very differently from its U.S. analogue. In my view, it will do so for six interrelated reasons.

First, the proposed statute expressly provides that exemplary damages may not be awarded. There is thus no counterpart to the U.S. statutory award of treble or triple damages even though compound interest from the time of injury may be awarded. The limitation to single damages surely reduces the incentives to institute class proceedings save perhaps in follow-on cases or where public investigations are widely publicized but no findings yet made. Be that as it may, the limit to single damages changes the leverage enjoyed by the class in settlement discussions which will almost inevitably follow down the road.

Second, while English law newly permits contingency fee agreements whereby a lawyer may share any recovery with a client, such fee arrangements would be expressly prohibited in opt-out competition class actions. In the United States, contingency fee agreements are the indispensable engine of class litigation. Class counsel, as well as undisclosed third-party financiers, may shoulder much of the costs of litigating the cases as well as share the risk of ultimate loss. Indeed, a class action plaintiff bar has emerged which touts itself as willing and able to mount collective actions often on a massive scale and substantially risk free to the nominal class representative.

Third, the statute would not alter the general British rule that the loser pays legal costs including the attorney's fees of the victor though this might be subject to the tribunal's discretion, the exercise of which cannot be known when the case commences. That risk is ameliorated at least to some extent by the availability of insurance which may, however, be costly. In any event, a would-be class representative would be at considerable financial risk that it will be unable to share with class members. In the United States, while a successful plaintiff is statutorily entitled to recover reasonable fees and costs, defendants are not. As a consequence, the prospect of very large costs may prompt defendants to bail out of a case by settlement at an early stage—a temptation heightened by the absence of any right of contribution among antitrust wrongdoers.

Fourth, there will be no trial by jury. In the United States, this is a constitutional right that can be invoked by either side. Some, including me, question the value of this right at least in complex competition law cases, whether criminal or civil. But U.S. courts generally have rejected the notion that there should be an exception to the right to trial by jury for antitrust cases in which lay jurors must assess complicated economic concepts often debated by sophisticated experts in seemingly incomprehensible testimony.4 Consequently, trial in the United States of an antitrust case may boil down to a form of morality play pitting the small guy plaintiffs against one or more big guys with the cards stacked in the plaintiffs' favor.

Fifth, no change is proposed in British court practices governing what Americans call pretrial discovery. While UK law has recently expanded the scope of documents disclosures, it remains significantly more restrictive than its U.S. counterpart. Most significantly, there is no right to pretrial testimony under oath (the classic U.S. deposition) either from opposing parties or third parties. I further understand that while disclosures are required to be exchanged and while procedure has recently been enhanced—thereby inviting pretrial controversies over adequacy and the like—there is, at best, only limited processes for pretrial ascertainment of the facts. It is vastly different in the United States, where compulsory pretrial testimony and production of documents is a central feature of virtually all litigation. Enormous amounts of money can be spent in the preparation for and in the taking of depositions of opposing or third parties as well as in the production of documents, which now includes retained emails that may have to be searched using keywords or more sophisticated tools such as predictive coding. All testimony and documents must be screened for relevance and privilege, which necessarily invites endless pretrial disputes. You may ask why Americans are so wedded to this prolonged, expensive and exhaustive process. The reason is that Americans seemingly abhor trial by surprise or ambush and believe extensive pretrial discovery will enhance fair and proper outcomes.

Sixth and finally, the proposed class certification process, with the broad discretion that will be entrusted to the CAT, seems designed to avoid many of the U.S. pitfalls. As noted above, if the proposed rules are adopted, the CAT may consider a wide range of factors in deciding whether to issue a collective proceedings order, including, most significantly in my view, the merits of the asserted claim.5 How extensive that consideration will be and how it will be undertaken remains to be seen. But it is likely to affect any decision to certify. In the U.S., the initiating claim, or complaint, as it is called, may upon motion by the defendants be subjected to a preliminary court scrutiny to determine whether the facts alleged, if proven, plausibly establish a violation of the competition laws.6 If it does, the case may then proceed to the class certification stage. But at least until recently, consideration of the merits was thought to be out of bounds under Supreme Court precedents extending back to the 1970s. While there may be emerging cracks in that bar, the battle over whether a class should be certified usually turns, not on any assessment of the merits, but rather on whether common issues of law and fact predominate.7 If they are found to do so, the resulting certification virtually guarantees a future settlement simply because the litigation costs and consequences of loss are so heavily multiplied for defendants confronting a certified class. Consideration of the merits generally occurs only after the heavy artillery of discovery has been survived and motions for summary judgment or dismissal are deemed ripe for consideration. But those motions are usually denied since trial courts understand that denial will likely yield a settlement.

In sum, on these six important issues the Consumer Rights Bill appears to have landed on middle ground, providing some of the benefits of the U.S. opt-out class action, while at the same time taking precautionary steps to prevent some of its excesses. Thus, if the bill passes, the British and U.S. opt-out class action procedures will share a common name and structure, but the differences in real-world application may be very great.

Footnotes

1 M. Laurence Popofsky is a Senior Counsel in Orrick, Herrington & Sutcliffe LLP's Antitrust and Competition Group, located in San Francisco. I thank my colleagues Douglas Lahnborg and David Goldstein for providing helpful comments in reviewing drafts of this article. The views expressed in this article are mine alone and do not necessarily represent the views of Orrick or its clients. This article is reproduced with permission from Antitrust & Trade Regulation Report, Vol. 106, No. 2651 (June 13, 2014). Copyright 2014 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com.

2 Consumer Rights Bill (HC Bill 180, 2013-2014), available at http://www.publications.parliament.uk/pa/bills/cbill/2013-2014/0180/14180.pdf

3 Competition Appeal Tribunal, Draft Tribunal Rules on Collective Proceedings and Collective Settlements (March 2014), Rule 7(1), available at http://catribunal.org.uk/files/Collective_Actions_Rules_Draft.pdf

4 E.g., In re Japanese Electronic Products Antitrust Litigation, 631 F.2d 1069 (3d Cir. 1980) ("a court should deny jury trial on due process grounds only in exceptional cases when the court, after careful inquiry into the factors contributing to complexity, determines that a jury would be unable to understand the case and decide it rationally.").

5 Department for Business, Innovation and Skills, Private Actions in Competition Law: A consultation on options for reform – government response (January 2013), paragraph 5.55; Competition Appeal Tribunal, Draft Tribunal Rules on Collective Proceedings and Collective Settlements (March 2014), Rule 7(2), available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/70185/13-501-private-actions-in-competition-law-a-consultation-on-options-for-reform-government-response1.pdf.

6 Fed. R. Civ. P. 12(b); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

7 See generally D. Goldstein, S. Leong and R. Rinkema, "A Year Later: Comcast's Impact on Antitrust Class Actions," available at http://blogs.orrick.com/antitrust/author/dgoldstein/.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.