A Court of Appeal decision may kickstart the UK's first opt-out class action, while the Competition Appeals Tribunal will decide whether to certify a second.
- “Opt-out” class actions have been available for competition damage claims since 2015. An opt-out action is brought by a claimant representative on behalf of a specified class of claimants, who are automatically included in the claim, unless they opt-out. The class representative must have the claim “certified” in the Competition Appeals Tribunal (CAT).
- Although the introduction of opt-out claims was meant to significantly change the landscape for seeking redress for infringements of competition law, to date no claims have been certified by the CAT.
- However, 2019 will see the Court of Appeal determining whether the CAT should have certified the class action brought by Walter Merricks, the former Financial Services Ombudsmen, on behalf of 46 million consumers, relating to overcharges allegedly imposed by Mastercard. We predict that the court will allow the claim to proceed, thereby kick-starting the UK’s first opt-out damages claim.
- We will also see the CAT grapple with two competing claims arising in relation to the cartel in trucks. One is opt-out (with an opt-in fallback), the other is opt-in (in opt-in claims, claimants have to positively select to be in the claim and cannot be included automatically). The CAT will need to decide whether to certify one, both, or neither. We predict it will allow the two claims to proceed as opt-in but will not certify the opt-out claim.
What is happening in the two claims?
Merricks commenced opt-out proceedings in September 2016, claiming damages arising from Mastercard’s alleged breach of competition law in respect of the level of fees charged to retailers for using its cards, which were allegedly anti-competitive and passed on to end consumers. Merricks claimed an aggregate award of damages and interest totalling approximately £14bn on behalf of 46 million consumers. This was the largest damages claim ever to be issued in the UK courts and is one of the first cases to test the new regime.
In July 2017, the CAT refused to certify the claim (refusing the application for a Collective Proceedings Order, (CPO)). The CAT drew attention to the expert evidence that had been adduced at the certification stage and stated that it did not show a suitable method for calculating damages (including in respect of pass-on and how damages could be attributed to each consumer). The CAT has to consider whether a claim is suitable for an aggregate award of damages and how any damages will be split between claimants. In this case, it was held that the case was too unwieldy to effectively calculate an aggregate award and that there was “no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant from the aggregate loss calculated”.
In October 2017, Mr Merricks applied for permission to appeal the CAT’s decision on certification to the Court of Appeal (CoA) and simultaneously applied for permission to judicially review the CAT’s decision. It was necessary to frame the application in both ways, because it was not clear from the legislation that the CoA had jurisdiction to hear an appeal from a CPO.
On 13 November 2018, the CoA held that Merricks had a right of appeal from the decision of the CAT. It stated that the reason for this right of appeal in respect of the CPO application depended on the meaning of the words “as to the award of damages”. The CoA held that the refusal of a CPO is, in effect, a determination that the claimant is not entitled to seek an aggregate award of damages and “is likely to prevent individual members of the represented class who have suffered loss from obtaining any compensation”. Therefore, the CoA found that it did have jurisdiction to hear and determine the appeal.
Following the concerns expressed by the CAT, Mr Merricks has had a detailed supplemental expert report prepared on: (1) how much of Mastercard’s illegal card fees were passed onto consumers in the form of higher prices; and (2) how Mr Merrick’s proposal for the distribution of the damages to consumers results in a payment that broadly reflects the actual loss suffered by each individual consumer in the class. It has yet to be seen how this new evidence will be treated and whether it will be sufficient to pass the hurdles of (1) the aggregate award of damages and (2) the distribution.
The substantive appeal has been listed for 05 and 06 February 2019 and we anticipate that the CoA will grant a CPO and allow the claim to proceed, officially kick starting the UK’s first opt-out class action.
On 18 May 2018, UK Trucks Claim Limited(UKTCL), a special purpose vehicle, filed an application for an opt-out claim to the CAT relating to losses said to arise from the cartel in medium and heavy trucks. In anticipation of the potential failure of the opt-out action, they also applied for an opt-in claim. The claim has been issued on behalf of British owners and lessees of over 600,000 trucks and seeks a damages award totalling approximately £14bn, a similar award to that sought in Merricks. In the event the action was successful, the truck owners and lessees could receive damages of approximately £20,000 per truck. The UKTCL application will be the first opt-out claim to seek a CPO from the CAT since the failure of the Merricks claim.
Following the application by UKTCL, the Road Haulage Association (RHA), a trade body for road transport and freight logistics operators also filed an application with the CAT. On 17 July 2018, the RHA applied for an opt-in claim with a similar proposed class to that of UKTCL.
In 2019 the CAT will be faced with hearing both applications and will have to make a decision on which application is most suitable to proceed. There will be tricky questions to answer, particularly considering the definition of the class. In the event that both claims are permitted to proceed, the CAT will have to ensure that claimants are not able to fall into both actions, for example by restricting opt-in claimants from falling within the opt-out class. It seems likely that the CAT will combine the CPO hearings to enable it to consider all the issues in one sitting.
This is the first time the CAT has had to consider competing applications since the introduction of the regime in 2015 and all eyes will be on it. Given the RHA already has a class of claimants that have actively chosen to join the action, it is our prediction that the CAT is most likely to certify the opt-in claim and refuse the opt-out claim brought by UKTCL, although it may allow the opt-in claim brought by UKTCL to proceed (to the extent this includes different claimants from those in the RHA’s action).
What it means for you
The cases to date show that the CAT is taking its time to analyse claims thoroughly before certifying any opt-out claim. Future claimants will need to be thorough in preparing and setting out any case before applying to the CAT. It is notable that high importance has been placed on the use of expert evidence in the two cases heard to date and claimants need to ensure that any methodology and data used by experts is sufficiently well developed before it is analysed at a CPO hearing.
It is also worth noting that the CAT has supported the use of third-party litigation funding in the opt-out claims to date and this is likely to increase the opportunities for funding of future opt-out claims.
While the regime has been something of a "slow-burner", we predict that 2019 will be the year in which we see the opt-out regime come to life. Once one claim proceeds successfully through certification and on to trial, we expect to see a marked increase in further such cases against defendants who find themselves on the wrong side of competition law.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.