UK: Consumer Rights Act 2015: private actions in competition law

29 September 2015

Jonathan Speed, Peter Willis, Jane Goodacre, Ariane Le Strat

The Consumer Rights Act 2015 (the "Act"), which will come into force on 1 October 2015,  will amend the Competition Act 1998 and the Enterprise Act 2002 in order to reform UK private competition law enforcement. The overarching theme of amendments is to make it easier for parties, particularly SMEs and individuals, to bring private enforcement actions in the UK. The three main ways in which the legislation does this are by:

  • widening the jurisdiction of the Competition Appeal Tribunal (the "CAT") and setting out improvements for CAT procedures;
  • promoting collective proceedings, in particular by introducing opt-out collective actions and opt-out collective settlements; and
  • providing the Competition and Markets Authority (the "CMA") with the authority to approve voluntary redress schemes.
Widening the jurisdiction of the CAT

Previously, the CAT was only able to hear follow-on cases (which are cases where an infringement has already been established by the CMA, the European Commission or a sector regulator). The Court of Appeal held in 2011 that the CAT could not go beyond the clearly identifiable findings of fact in the infringement decision, and claimants could not seek to rely on mere inferences from the decision. In practice, this was a significant limitation on the jurisdiction of the CAT, because a claimant will often wish to be able to look beyond the findings in the decision. A claimant wishing to bring a stand-alone claim (which requires the party bringing the action to prove infringement) was therefore obliged to do so in the High Court.

The reforms which are implemented by the Act allow the CAT to hear both follow-on and stand-alone claims. The CAT has also been given powers to grant injunctions as well as procedural powers which are in line with those in the High Court such as provisions to implement a fast track procedure and to stay proceedings.

Another notable reform is that the limitation period for claims made in the CAT has been extended and brought into line with the High Court (ie. six years, instead of two years, from the date of the infringement decision or the determination of any appeal). However, this will change again when the competition damages Directive is implemented in English law - the deadline for this is December 2016.

Collective Proceedings

The CAT already has jurisdiction to hear opt-in collective proceedings, in which individual claimants are required to elect to join the claim. Only one such action has been brought, a consumer claim in relation to replica football kit. This procedure is generally agreed not to have been a success. To replace this procedure, the Act will introduce new opt-out collective actions.

The opt-out scheme will automatically include all UK-domiciled (those who are not UK-domiciled must "opt-in") claimants into the proceedings unless they actively "opt-out" in a manner determined by the CAT. The Act provides for several safeguards in order to maintain the integrity of the claims. For example, the CAT will scrutinise the collective action before it can proceed, having regard to all elements of the action before making a collective proceedings order that allows it to continue. Exemplary damages will be prohibited and the presumption that the losing party pays the winning party's costs is retained.

The introduction of collective competition damages actions in the UK should be viewed in the context of an increasing focus at an EU level on facilitating private competition enforcement. The European Commission is keen to see victims of anti-competitive activity obtaining effective redress, and also acknowledges the public benefits of the greater deterrence generated by a more developed private enforcement culture. The competition damages Directive is the EU's principal tool in this area, but the Commission has also issued a Recommendation on collective redress mechanisms (and not just for competition claims). Interestingly, though, the Recommendation is limited to "opt-in" actions, and it deprecates "opt-out" actions of the type now being introduced in the UK.

Voluntary Redress Schemes

The voluntary redress scheme has been introduced as a method of alternative dispute resolution. It will allow undertakings found to have infringed competition law to establish a scheme to compensate businesses and/or consumers that have purchased the affected goods or services, which must then be approved by the CMA. The intention is to provide for compensation without the need for proceedings before the courts or the CAT. Regulations adopted in August 2015 set out the requirements for such schemes, including requirements for the administration of the scheme (involving an approved independent chairperson) and approval by the CMA, and the information to be provided to potential beneficiaries as well as the terms of the scheme. The CMA has also published draft guidance on its approach to approving schemes.

In summary, the Act is intended to make it easier for businesses and consumers to obtain redress for losses resulting from infringements of the competition rules. Follow-on damages claims are already an almost inevitable consequence of any competition infringement decision, and these reforms will not only make follow-on claims still more prevalent, but will also give rise to a greater number of stand-alone claims.

For further information please contact any of the below or any other member of Bird & Bird's International Dispute Resolution group or Competition & EU group with whom you usually deal.