On 1 October 2015, the Consumer Rights Act (the "CRA") came into force. Among the raft of legislative amendments that it introduced were big changes in the way in which consumers and companies affected by anti-competitive behaviour can pursue damages for the losses that they incurred.
Although regulatory enforcement against anti-competitive behaviour is strong and well-established in the UK and around Europe, civil claims for damages actions brought by parties who have suffered loss as a result of anti-competitive behaviour have been slow to take off. Encouraging private damages claims is one of the key objectives for the CRA.
The CRA stream-lines the process for competition damages claims in three main ways:
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Increasing the power of the Competition Appeal Tribunal (CAT) by (amongst others): extending the limitation period for claims brought before it; allowing the CAT to hear claims either on the basis of an existing infringement decision (a follow-on claim) or without any such predetermined finding of fault (a stand-alone claim); and providing a fast track procedure for small scale claims.
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Expanding the notion of collective redress schemes, allowing claimants to group together and claim for damages under classes. The CRA introduces an "opt-out" mechanism, which means that for claims which follow this route, those parties who fall within a "class" for the purposes of the proceedings will be automatically included in the claim unless they take steps to opt out.
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Introducing voluntary redress schemes, designed to allow recovery of losses without resorting to lengthy court battles. Often in competition claims, particularly in follow-on actions, the existence of anti-competitive conduct is largely accepted and the main issue is the amount of damages (if any) that the claimants are entitled to. This is where voluntary redress schemes are most likely to be relevant.
Six months on, what has happened?
The changes to competition damages actions brought about by the CRA are far-reaching, and it will take some time to see the practical impact that they may have on the damages actions landscape. However, already there are signs that the CRA will become a useful tool to facilitate redress in competition cases.
The fast-track route has been used in the CAT three times. The latest action was issued on 4 April 2016, and the two previous instances have already resulted in swift settlement. Traditionally, competition law damages actions have been very complex, lengthy and expensive procedures, which our experience in this area supports. The fast-track route was intended to open up the option of pursuing claims of any value by claimants of any size, rather than competition litigation being the preserve of corporate behemoths.
The first case was an action for damages following on from an abuse of a dominant position in the market for qualifications and accreditation in occupational health. The damages claim was issued on 17 December 2015, and was settled less than a month later on 11 January 2016, the day before a case management conference was due to be held. The second case involved two individuals bringing an action against Tesco, claiming that a land use restriction was in breach of competition rules and the common law doctrine of restraint of trade. Notice of the claim was published on 18 February 2016, and an order of the CAT dated 17 March 2016 withdrew the claim following settlement, two working days before a case management conference was due to be held.
The most recent action also centres on a claim for damages following abuse of a dominant position in qualifications and accreditation, this time alleged to be perpetrated by the Law Society. The claimants contend that the Law Society's requirement for law firms to undergo certain types of training with it abuses its dominant position, unfairly preventing other training companies such as the claimant from offering these services. Although it is early days in the implementation of the new rules in terms of identifying trends, it seems that dominant regulatory bodies that provide accreditation and qualifications are at risk of becoming targets for damages actions.
At the other end of the scale, the introduction of collective redress schemes is intended to streamline high value and complex cases, avoiding the need for parallel proceedings – something which often occurs in big ticket damages actions and further hampers already painfully slow procedures. The opt-out process in particular presents a number of procedural hurdles at the outset, and lawyers acting on such cases typically have conditional fee arrangements in place, accompanied by after the event insurance to offset the risk of losing the case. As such, the potential rewards have to be substantial in order to justify the initial risk and the cost of the insurance.
In March this year, solicitors Leigh Day & Co launched the first opt-out class action under the CRA, representing the National Pensioners Convention. The claim is for damages of £7.7 million as a result of inflated prices for mobility scooters manufactured by Pride, which was found guilty of competition law breaches in 2014 by essentially setting minimum resale pricing levels. At the time of writing, the class action still needs to be approved by the CAT, at which point all members of the class would be automatically covered by the claim. It is interesting for competition practitioners to note that the first competition class action has been brought by a firm of solicitors most noted for claimant personal injury and medical negligence cases – a sign of things to come perhaps?
It has also been suggested that the damages claims resulting from the foreign exchange rate manipulation cartels may be a suitable test case given its size and value, but this remains a theory only at this stage.
Conclusion
The CRA represents a sea-change in consumer legislation in the UK, and has far reaching effects for consumers on many levels. The changes to the competition damages regime is just one strand of the legislation, but one that has the capacity to effect wide-scale changes not just to the rights of consumers, but the way in which those rights are addressed and safe-guarded. The practical impact of these changes remains to be seen, but in the relatively new and ever-developing landscape of private damages actions in competition law, the impact is likely to be far-reaching for consumers and businesses of all sizes.