Introduction
The rise in UK class actions related to anti-competitive behaviour by corporates surged to over £26 billion last year, according to a recent report by Thomson Reuters. This growth represents a six-fold increase in value, from £4 billion in 2021 to over £26 billion in the past 12 months, as a result of a rise in competition class action cases lodged with the Competition Appeal Tribunal (CAT), from five cases in 2021 to nine cases in 2022.
This is just one of many findings in Thomson Reuters’ analysis of the current state of class actions in the UK market. Here are five of the key takeaways to emerge from the data:
Key takeaway 1: CAT out of the bag
While the US has been the historic hub for class actions, UK companies are increasingly exposed to the mechanism (indeed, many US class action firms have opened UK branches to target the increase in work). Competition law Collective Proceedings Orders (CPOs) before the CAT are collective damages claims brought on behalf of multiple claimants, with millions of claimants in some cases, claiming legal compensation for breaches of competition law. CPOs must be commenced by an authorised representative of the claimants, who are an identifiable or defined class of individuals, and the claims are eligible for inclusion only if the CAT considers that they raise substantially the same or related issues.
CPOs are governed by Rules 75 – 93 of the CAT Rules and they have four main stages: (i) making a CPO; (ii) trial of the common issues; (iii) determination of any individual issues; and (iv) distribution of any damages. CPOs have proven to be an attractive mechanism when a claimant is not large enough on its own to be economically justified in bringing a single damages claim, however, when consolidating similar claims in one collective action, results in economies of scale.
Key takeaway 2: Tech targets
The report notes that there has been a significant focus on technology and digital markets among the class action competition claims, with 13 of the 16 applications in the past two years being in the technology and telecommunications sectors. The defendants of the multi-billion-pound claims are amongst some of the world’s largest tech companies. As well as the global tech companies, leading crypto exchanges have also been the target of recent class action suits.
Key takeaway 3: Funding your way
The report notes that one of the driving forces behind the rush of competition-related class actions are the keen litigation funders who have been investing in the high value claims. The litigation funders agree to pay the claimant’s legal fees in exchange for a share of the large proceeds in the event that they win. The report explains that these sorts of cases can be appealing where liability has already been established by a European Commission (or Competition & Markets Authority) case. In such ‘follow-on’ cases, the disputed issues can be narrowed to the extent of damages owed, although the report notes the recent trend is to fund more risky standalone claims, especially in the tech sector.
As the report notes, these ‘follow-on’ cases were initially appealing, however, the growth in significantly larger opt-out claims and litigation funding options has encouraged more risky ‘standalone’ claims, where liability must also be established. The research found that 6 of the first 9 CAT class action damages claims were follow-on damages claims (66% of claims between 2015 and 2020). However only 2 of the last 13 claims were follow-on claims (15% from 2020 onwards). This has led to a market of materially larger and more complex CAT damages claims.
Key takeaway 4: Court in the act
In accordance with section 47B of the Competition Act 1998, collective actions for damages (including both follow-on and stand-alone claims) may be brought in the CAT on an opt-in or opt-out basis. Historically, these actions could only be brought on an opt-in basis – as such, each claimant was required to actively elect to join the proceedings, however, reforms from 2015 have paved the way for out-out cases.
- The opt-in regime (Rule 82(1)(a) CAT Rules)
- Opt-in proceedings are those where a CAT judgment only binds class members that have actively ‘opted-in’ to the proceedings by indicating that they wish to be represented by the class representation. The CPO sets out the dates by which class members must opt-in and how they can do so. Class members that miss the date will require the permission of the CAT to opt-in and the CAT will consider reasons as to why the deadline was missed and whether the defendants would be prejudiced by allowing the application.
- The opt-out regime (Rule 82(1)(b) CAT Rules)
- Out-out proceedings are those where each person within the class is automatically included in the proceedings unless they actively choose not to be. Therefore, under this regime, claimants who have been allegedly impacted by infringements of competition law are deemed to be involved in the action pursued on behalf of a class unless they have expressly opted out. The report implies that opt-out class actions have a much higher number of potential claimants and claim value, than the more traditional opt-in lawsuits. The report also confirms the popularity of the opt-out regime, as all of the collective damages applications made to the Competition Appeal Tribunal in 2021 and 2022 were brought on an opt-out basis.
Under Rule 79 of the CAT Rules, the CAT will consider that a claim is eligible for inclusion in collective proceedings where it is satisfied by the proposed class representative that the claims are (a) brought on behalf of an identifiable class of persons; (b) raise common issues; and (c) are suitable to be brought in collective proceedings. With regard to their suitability, the CAT will take into account all matters, including – costs issues, the size and nature of the case, whether it would be a fair and efficient resolution of the common issues and whether the claims are suitable for an aggregate award of damages. Collective proceedings, particularly under the opt-out regime, require intensive case management by the CAT, so as to ensure that the interests of the class are adequately protected.
Key takeaway 5: Are EU there?
Notwithstanding Brexit, the report also confirms that EU competition law can continue to form the basis for many competition class action damages claims in the UK. For CAT, class action proceedings, any anti-competitive conduct occurring before 31 January 2021 can be litigated under both the UK and EU competition rules, significantly expanding potential claims, claimant class numbers, and potential damages awards. For example, the report notes that 10 CPOs were issued in 2022, indicating an upcoming surge in class action trials. For potential infringement of EU competition law after 31 January 2021, claimants may look to have parallel damages claims in the UK and EU.
