On 24 April 2012, the Department for Business, Innovation and
Skills (BIS) launched a consultation on how best to encourage damages
actions based on breaches of competition law. At present, the
level of these claims is very low in the UK. Current
disincentives against bringing such claims include the difficulties
and expense of going to court and the fact that although large sums
may be at stake, they are spread across many businesses or
consumers with each one having lost only a small amount.
BIS' proposals focus on four areas:
- extending the remit of the Competition Appeal Tribunal (CAT) for competition damages actions in the UK;
- introducing an opt-out collective actions regime for competition damages claims;
- promoting Alternative Dispute Resolution (ADR) to ensure the courts are the option of last resort; and
- protecting the incentive to blow the whistle on cartels ('leniency').
Extending the CAT's remit
Currently the CAT can only hear competition damages claims where
there exists a prior decision that competition law has been
infringed (e.g. a Competition Act 1998 infringement decision by the
Office of Fair Trading (OFT) or an Article 101 TFEU infringement
decision by the European Commission). These are known as
follow-on claims.
BIS' proposals include:
- the CAT should be able to hear competition damages claims where there is no prior infringement decision ("stand-alone claims");
- allowing the High Court to transfer cases (or parts of cases) alleging competition law infringement to the CAT;
- giving the CAT the ability to hear applications for injunctions. BIS believes that frequently redress and damages are less important to the claimant than simply causing the anticompetitive activity to stop;
- introducing a 'fast-track' procedure in the CAT for competition damages claims. This would: (i) allow swift granting of interim injunctions; (ii) allow cross-undertakings for damages to be waived or limited; (iii) aim to hear cases with six months of their being laid; (iv) resolve issues on paper wherever possible; (v) keep oral hearings to a minimum; (vi) have no or limited court fees; and (vii) cap liability for defendants' costs (up to a maximum of £25,000).
BIS is also considering whether to make it easier for claimants
to quantify the losses they have suffered due to a cartel by
introducing a rebuttable presumption of loss. This would be
likely to take the form of a presumption (which could be disproved
by either side) that a cartel had affected prices by a fixed amount
e.g. 20%. This represents a radical departure from the
current position, where the onus to quantify loss is on the
claimant, who often lacks precise information to enable him to
carry out a overcharge analysis.
In addition, BIS is inviting comments on issues relating to the
passing on defence, relevant to business to business claims.
The passing on defence could allow a defendant to show that the
claimant had in fact suffered no loss on the basis that the
claimant passed on any cartel price overcharge to someone who
bought goods/services from him (an indirect purchaser). BIS
is considering whether the passing on defence should be dealt with
directly in legislation, either explicitly allowing it or
forbidding it, or introducing some kind of rebuttable presumption.
However, overall BIS takes the view that any clarification of the
use of the passing on defence should be dealt with at EU level, in
the context, for example, of any further deliberations by the
European Commission on damages actions for breaches of the
antitrust rules.
Opt-out collective actions
Currently in the UK collective actions regarding breaches of
competition law are open only to consumers. Such actions must
be brought by particular representative bodies based on a previous
infringement decision (i.e. follow-on cases only). They are
'opt-in' actions. To date, there has only been one
such claim (Which?'s case against JJB Sports in relation to
replica football shirts).
Opt-in means that individuals must actively election to join the
action. Opt-out means that all parties who fall within the
definition of the represented group are bound by the outcome of the
case unless they actively opt out of the action.
BIS is seeking views on:
- whether to introduce a CAT opt-out collective actions regime for competition law redress, covering both businesses and consumers, for both follow-on and stand-alone claims;
- how to prevent speculative or unmeritorious claims; and
- who should be permitted to bring such actions, with those under consideration including individual companies and consumers, representative bodies, legal firms, third party funders and public sector bodies.
BIS emphasises that these considerations relate only to competition law and that it does not favour the introduction of a generic collective redress mechanism covering all sectors either in the UK or at EU level.
Encouraging ADR
BIS is minded to ensure that courts and the OFT can use ADR wherever suitable, and to encourage private and third sector bodies to provide further forms of ADR to reflect any change in the number or nature of private actions. It is seeking views on:
- whether mediation should be purely voluntary, mandatory, or a default but non-mandatory approach;
- whether pre-action protocols should be introduced for competition cases in the CAT, and if so, what forms these should take;
- whether the competition authorities should be given a power to order a company found guilty of a competition law infringement to implement a redress scheme, or certify a voluntary redress scheme. Such redress schemes would be a new feature in the competition landscape and would be in addition to fines/other sanctions imposed by competition authorities.
Protecting leniency
When a company involved in a cartel blows the whistle on that
cartel to a competition authority, it may qualify for leniency -
immunity from fines (or a substantial reduction in fines).
This is the way that competition authorities discover the majority
of cartels.
When it blows the whistle, a cartel member is admitting its
involvement in a breach of competition law. A claim for
leniency involves the disclosure of substantial information about
the activities of the whistle blower and its cartel
associates. The whistle blower may be particularly concerned
that its opening up to the competition authority also opens it up
to private actions for damages. The question of whether
companies can be forced to release documents created in relation to
leniency is currently a hot topic. Recent EU and UK level
cases have held that such documents are indeed candidates for
disclosure, subject in each case to a balancing exercise between
national law and interests protected by EU law. This changes
the incentives for whistleblowing.
BIS is minded to protect certain aspects of leniency documents
from disclosure. Its current thinking is that documents
directly involved in the leniency application and which would not
have been created if the company had not sought leniency should be
protected. However, it requests views on the precise details
of which documents should be protected and which should be
disclosed.
Another area raised by the BIS consultation is whether
whistleblowers should be protected from the joint and several
liability that currently exists between cartel members for damages
awarded. This would mean that whistleblowers' liability
would be limited to the damage they cause, not the entirety of
damages caused by the cartel. BIS notes that there are
complexities in how to extend this protection to other leniency
applicants, such as those that receive less than 100% immunity from
fines.
Next steps
The consultation raises many wide-ranging issues and is open for
submissions until 24 July 2012. Several of the options raised
represent a radical departure from the current position. The
proposals for opt-out collective actions and for a presumption of
loss (albeit rebuttable) in cartel cases will be particularly
controversial. This consultation is also emerging at a time
when a European Commission consultation on similar issues is
expected.
This is an important opportunity to make your views known and
influence the future shape of competition litigation in the
UK. Please contact us if you wish to discuss further the
issues arising.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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 25/04/2012.