Brussels Antitrust/Competition partner (and English lawyer) Matthew Hall brings us this report on the first antitrust class action filed under new procedures in the UK.
Much ink and conference time have been spent discussing it, but now we have a real example of an antitrust class action in the UK. This is the first under the 2015 rules allowing such claims, Schedule 8 of the Consumer Rights Act 2015.
The UK Competition Appeal Tribunal (CAT) confirmed on June 21 that the case had been started when it published a “notice of an application to commence collective proceedings under section 47B of the [UK] Competition Act 1998.” This application represents the first step in the process. Under it, the proposed class representative is seeking an order permitting her to act as the class representative, determining that the case is suitable to be heard as a class action, and deciding that it should be opt-out (as opposed to opt-in). Another key issue at this initial stage will be whether the proposed representative has adequate financing to bring the claim.
It was widely assumed that the first such case would be based on a cartel fining decision from an antitrust regulator (likely the UK Competition and Markets Authority (CMA) or the European Commission). Instead, the case rests on a 2014 decision by the CMA’s predecessor, the Office of Fair Trading, finding the potential defendant in this class case, Pride Mobility Products Limited, to have engaged in a type of online resale price maintenance (RPM) in relation to mobility scooters.
The benefit for the class in basing the claim on this regulatory decision is that it does not have to prove liability for an infringement of competition law; that has already been established. Nevertheless, as an aside, it’s notable that that decision itself was somewhat controversial (or at least cutting-edge at the time) since it equated a ban on advertising online prices below Pride’s recommended retail prices with RPM. The CMA, however, has not been deterred, and subsequently several cases have been decided on the same lines.
A bellwether for UK antitrust class actions. The CAT’s view on the Pride case will be very closely watched and it is likely significantly to impact whether future claims under the class procedure are brought. A previous type of class procedure, replaced by the 2015 rules, allowed for a “specified body” to bring a consumer claim on behalf of two or more individuals to seek monetary damages for an infringement of competition law. Only one such body was ever specified, and it only ever brought one claim, relating to price fixing of replica football/soccer kits. The procedure was widely seen as a failure.
How closely will class actions in the UK parallel those in the United States? The UK’s new class procedures were expressly designed to address the shortcomings of the prior regime and produce a significant number of class action cases, but there was intense debate in the period up to adoption. Therefore, safeguards were included to stop what are seen as the excesses of the U.S. class action system (including the bringing of unmeritorious claims, the availability of treble damages, and the use of contingency fee arrangements by lawyers). Hence, the CAT will now in this first stage of the case very closely scrutinise the various points mentioned above (suitability of the representative and of the case for class treatment, etc.). Nevertheless, U.S. practice and arguments, where there are parallels, are likely to figure strongly.
What about the money? The allegation is that up to 34,000 Pride customers, who bought mobility scooters between 2010 and 2012, may each be entitled to around a £200 refund, or even more in specific cases. The potential claim has been valued at up to a total of £7.7 million, including interest.
It’s not known on what financial basis the lawyers are acting. However, under the regime, lawyers cannot use DBAs (damages based, or contingency, agreements). This means that third party funding (which is allowed) is likely to play a significant role, with conditional fee arrangements being put in place. The UK’s normal “loser pays costs” rule does apply, so an unsuccessful claimant will be liable for the defendant’s costs. After the event (ATE) insurance can be used, but the premiums cannot be recovered from the losing party.
Small business fast-track claims are playing out at the same time, on a smaller stage. Although high profile, this class action case is not the only cutting-edge development in competition litigation currently before the CAT. The Consumer Rights Act 2015 introduced other changes, one of which was the introduction of fast-track B2B claims, aimed at making it easier for small and medium-sized businesses to make competition law challenges before the CAT. The first two of these settled at an early stage, but the third (the Socrates case) is currently proceeding.
A big issue in the fast-track procedure is the ability of the CAT to cap recoverable costs against the loser. The CAT has taken a view on that issue already in the Socrates case and has set the cap on the claimant’s recoverable costs (against the defendant) at £200,000 and the cap on the defendant’s recoverable costs from the claimant at £350,000 (both sides can spend more if they wish, but could not recover it from the other). For most companies at the smaller end of the “small and medium enterprises” scale in the UK, this level of cost risk is very high indeed, and is likely to discourage many from making use of the procedure. The CAT may have to rethink these levels if it wants more claims to be made.