Authored by Aidan Robertson QC, Brick Court Chambers
While many of these claims are being brought by large commercial organisations (often with the support of third party litigation funders), there is now also the first application to bring a major collective damages claim before the Competition Appeal Tribunal ('CAT') on behalf of consumers under a procedure introduced by the Consumer Rights Act 2015. This is also supported by third party litigation funding.
There are essentially two types of damages claim for anti-competitive practices.
- First are claims which 'follow on' from a finding of infringement of EU and/ or national competition laws by the European Commission or national competition authorities.
- Second are claims which are independent of any such infringement finding. These are known as standalone claims.
In practice, many claims combine follow on and standalone claims and are known as hybrid claims.
Claims with a follow on element normally arise out of cartels, i.e. covert agreements to fix prices and share markets, which are typically uncovered following a cartel member's decision to blow the whistle on the claim and seek leniency from a competition authority. A successful leniency application which is first to reveal the cartel to an authority can lead to complete immunity from fines, and as competition fines at EU level can now run into billions of euros, that is a substantial incentive to cooperate.
For example, in the European Commission's Truck Cartel decision, total fines of €2,926,499,000 for price-fixing were imposed on Volvo/Renault, Daimler, Iveco, and DAF, while the fifth truck manufacturer found to have participated, MAN, escaped any fine as it was the whistleblower. A number of damages claims following on from this cartel are already under preparation in London (as well as one which has already been commenced in Ireland).
However, not all competition damages claims relate to cartels. There are a considerable number of claims currently being brought against the MasterCard and Visa organisations arising out of commercial arrangements between those businesses and their member banks to fix the price for settling credit and debit payment card transactions, known as the 'Multilateral Interchange Fee' (MIF). MasterCard had formally notified the MIF agreements to the European Commission for approval (an option which ceased to be available in 2004) and this led to a long-running investigation before the Commission adopted an infringement decision against MasterCard in 2007 condemning the MIF as unlawful price fixing.
MasterCard failed in its appeal to the EU's General Court in 2012 and further appeal to the EU Court of Justice in 2014. MasterCard is now being sued in London by a number of retailers on the basis that costs they were charged for processing payment card transactions were unlawfully inflated by the MIF. While many of these claims are being brought by large commercial organisations (often with the support of third party litigation funders), there is now also the first application to bring a major collective damages claim before the Competition Appeal Tribunal ('CAT') on behalf of consumers under a procedure introduced by the Consumer Rights Act 2015. This is also supported by third party litigation funding.
Judgment in the first of the MIF damages claims to go to trial, Sainsbury's Supermarkets v MasterCard was handed down [to] the CAT, to which the case had been transferred from the High Court, in July 2016, after a 23-day trial in January to March 2016. Sainsbury's was successful in its claim and awarded damages of £68,582,245 in respect of the overcharge in relation to credit cards and £760,406 in respect of the overcharge in relation to debit cards, together with interest to be calculated. A number of similar claims are also being brought against Visa in London on a purely standalone basis as there has been no European Commission decision equivalent to that against MasterCard.
The Sainsbury's case is notable in that it is the first claim for anti-competitive price-fixing to proceed to trial and an award of damages. However, it should not be concluded from this that such claims are unusual. In fact, in the past decade there has been an explosion of cartel damages litigation in the English Courts. A notable feature has been that, after some interlocutory skirmishes (particularly on limitation and jurisdictional points), all claims have been settled either before trial (which is normally the case – for example, damages claims in which I have acted and which settled include cartels in Vitamins, LCD Panels, Copper Tubes, Copper Fittings and Refrigeration Compressors) or shortly after commencement of trial (National Grid, Cooper Tire – the rubber cartel).
Furthermore, successive governments have intervened to legislate to reduce the scope for interlocutory skirmishing in order to improve the ease with which damages claims can be brought. The jurisdiction of the CAT to hear damages claims, first introduced by the Enterprise Act 2003, had been limited to pure follow on claims (so that any hybrid or standalone claim had to be brought before the High Court) and a separate limitation period for such claims led to a swathe of satellite litigation on its interpretation. The Consumer Rights Act 2015 swept away the limits on the CAT's jurisdiction as to which claims it could hear, giving it effectively as broad a jurisdiction as the High Court, and allowed cases to be transferred from the High Court to the CAT (as was done for the first time in Sainsbury's). This means the CAT can operate in effect as a specialist division of the High Court, where hearings are before judges with a high degree of competition expertise, sitting together with wing members chosen for their expertise in economics and business. Because of its specialist expertise, bringing cases in the CAT does not involve the risk of having to educate a judge in an area of law with which the judge might not previously have been familiar. The CAT also has considerable administrative resources in the form of judicial assistants (référendaires) and its own expert registry, while not being burdened with the daily lists of business encountered in the High Court. It is therefore able to hear cases more speedily than the High Court. It is likely to become the favoured venue for competition damages claims.
The European Commission has drawn upon features of the UK approach to competition damages litigation and has sought in the Antitrust Damages Directive (2014) to identify the key features which ought to be implemented throughout all EU Member States by the end of 2016. These include rules allowing for disclosure of documents, a powerful weapon for claimants in common law litigation which is unknown to most continental civil law jurisdictions. However, the lack of experience in continental jurisdictions with dealing with disclosure – particularly with the issues of electronic disclosure which are now meat and drink to the English Bar and judiciary – means that claimants will continue to wish to bring claims in London in order to get the most extensive disclosure possible. London's other great advantages for claimants remain the availability of third party funding and the English costs regime. Neither of these are addressed by the 2014 Damages Directive and so it remains to be seen in practice how much practical difference its implementation in continental Europe will have. Indeed, there is a school of thought that the uncertainties in its drafting will prove a disincentive to litigation, due to the risk of continental courts making Article 267 TFEU references to the EU Court of Justice as to the Directive's interpretation and thus delaying claims.
Will Brexit place a dampener on the rapid growth of London as the preferred centre for cartel litigation? In my view, no. Even if there is a hard Brexit (i.e. the UK does not remain subject to EU legislation through an arrangement based on the European Economic Area) and the underlying laws are different, the fundamental practical advantages of litigating in London – disclosure, funding, costs – will still apply.
The main changes in the law will concern rules as to establishing the jurisdiction of the English courts and the basis in the law of tort for bringing a claim. Jurisdiction is currently governed by the Recast Brussels Regulation 1215/2012. Post-Brexit, we will revert to the Civil Jurisdiction and Judgments Act 1982, which applies the pre-Regulation version of the Brussels Convention as between the UK and other EU Member States. As for other States, the normal common law jurisdictional rules will continue to apply. As is currently the case, once a claim is anchored by a defendant within the jurisdiction of the English Courts, other defendants can be joined in if they participated in the same cartel. While EU law on anti-competitive practices will have ceased to be directly applicable in the UK, breach of EU law elsewhere can still be litigated as breach of a foreign tort under the Private International Law (Miscellaneous Provisions) Act 1995. Foreign tort claims are a regular feature of commercial litigation in the English courts. Enforcement of judgments will be governed, not by EU law, but [by] relevant international treaties or the normal common and local law rules (for example, as remains the case to this day between UK and USA).
However, all of this deals with claims whether the cause of action arises post-Brexit. Where the cause of action relates to cartel or other anti-competitive conduct prior to the date of Brexit, English limitation rules mean that current rules on jurisdiction and applicable law continued to apply for at least a further six years. And in the case of covert conduct, that six years does not begin running until it is uncovered. The pre- Brexit regime thus still has many years to run.
Originally published in Funding In Focus, Issue 4: 2017
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