Pumping up the claim volume

A new class action mechanism will shortly become available for antitrust damages claims, where claimants seek redress for cartel or abuse of dominant position infringements.

The mechanism will stand out in the current civil litigation landscape by dint of the fact it is designed to make a civil claim easier, not harder.

The new mechanism, enabled by schedule 8 of the Consumer Rights Act 2015, will, for the first time, introduce an ‘opt-out’ collective redress mechanism to the UK. Opt-out systems require putative class members to take a proactive step in order to be excluded from the class. The government intends that this new mechanism will be available from 1 October.

The act introduces a number of further changes, including opt-out collective settlements which are binding on parties that have not opted out, but here we focus on the new opt-out mechanism.

The act comes at a time of considerable legislative development in European antitrust litigation. At EU level, the Antitrust Damages Directive (2014/104/EU), which member states must pass into national law by December 2016, is intended to facilitate antitrust litigation across the EU. The non-binding Commission Recommendation (2013/396/EU) recommends that collective redress mechanisms should be available in antitrust claims, but that such mechanisms should be opt-in, rather than opt-out. A minority of member states, including the UK, have chosen opt-out systems.

If the new mechanism proves workable, it could significantly increase the volume of claims brought in the UK, cementing its position as a European jurisdiction of choice for antitrust claims.

Claims under the new system will be brought in the Competition Appeals Tribunal, rather than the High Court. The new mechanism includes a certification stage, where the tribunal will decide whether the claim should proceed, through granting a Collective Proceedings Order. Only UK-domiciled claimants can be joined on an opt-out basis; other claimants must proactively opt in. At the certification stage, the tribunal must be satisfied that it is ‘just and reasonable’ that the nominee be the representative for the proceedings.

The Draft Rules provide that the tribunal may certify a claim as eligible for collective proceedings where they: are brought on behalf of an identifiable class of persons; raise common issues; and are suitable for collective proceedings. The tribunal can certify claims to continue either on an opt-in or an opt-out basis.

This is the UK’s first opt-out mechanism. There are no domestic precedents and, notwithstanding differences in legislative framework, the tribunal may look to how disputes on certification have been approached in other jurisdictions, and in particular the US, given its well-developed case law on class certification.

Early claims will provide indicators on the impact of the new mechanism.

But it has already been attracting attention from funders and from the US plaintiff bar, with reports of London offices being opened and increased recruitment. There will be competition between claimant law firms to have claims certified, which could lead to US-style ‘races to the courthouse’.  

Also, the interplay between antitrust regulatory authorities and litigation will become increasingly important. Following an investigation, regulators such as the European Commission or the Competition and Markets Authority may rule that an antitrust infringement has occurred. Such rulings are binding on UK courts hearing antitrust damages claims, so claimants in a ‘follow-on’ claim, that benefits from an infringement decision, need not prove liability, with the main question being quantum.

It is not yet clear whether there will be a ‘big bang’ of claims issued on 1 October or whether this is a slow-burner, but investment in London antitrust litigation teams suggests there will be heat.

Kenny Henderson is special counsel at Covington & Burling. This article was co-authored by partner Alex Leitch