Opt-out class actions gain momentum in UK’s specialist competition court

Opt-out class actions in competition cases have been on the rise since the landmark Merricks Supreme Court judgment in late 2020. In 2021, the UK’s Competition Appeals Tribunal (CAT) certified three opt-out mass actions involving payment card interchange fees, one involving landline telephone services, and two related claims involving train fares. Together, the mass actions involved claims worth approximately £12.6 billion. 

The two further mass actions certified so far in 2022 add claims worth up to £1.65bn in total - with the number of cases only expected to increase in coming years.

‘Opt-out’ and ‘opt-in’ mass actions

Most of the options currently available in England and Wales for mass actions operate on an 'opt-in' basis, meaning that in order to participate, every claimant has to take proactive steps, such as to issue or join proceedings or authorise another to bring the claim on their behalf.

The alternative, an 'opt-out' procedure, allows a party to bring a claim on behalf of an entire class, without the express mandate or even knowledge of each member of that class. If the court allows the claim to proceed then, unless individual members of the class opt out – i.e. take proactive steps not to participate – any remedy awarded will be binding on and available to all members of the class.

Until relatively recently, opt-out mass actions have not been a significant feature of the English regime, in contrast to the position in the US, for example. However, in 2015 an opt-out regime before the UK Competition Appeal Tribunal (CAT) was introduced for infringements of competition law, and there is an ongoing debate about whether the English legal system should make wider use of opt-out procedures. 

The competition collective proceedings regime is seen as something of a ‘pilot’ for the use of opt-out mass actions procedures in the UK. As a result, the progress of the actions currently before the CAT, and consumer take-up of any damages ultimately awarded in successful opt-out actions, will be closely watched by lawyers and businesses interested in whether opt-out procedures might be introduced in the UK beyond the competition sphere.

McLaren v MOL

In February 2022, the CAT certified the UK’s fourth opt-out collective action. McLaren v MOL involved a claim worth up to £150 million against shipping companies that were found by the European Commission in 2018 to have breached competition law by engaging in price-fixing in relation to the provision of roll-on and roll-off vehicle transportation services. 

In April 2022, the CAT refused permission to appeal against the collective proceeding order (CPO) it had granted to Mark McLaren, who represents UK-domiciled consumers and businesses that purchased or leased a vehicle between October 2006 and September 2015. The granting of a CPO is an essential preliminary step before a collective claim proceeds to full trial.

Forex judgment

The opt-out mass actions regime suffered its first setback in March 2022 in a judgment relating to the forex infringements when a 2013 investigation by regulators in Asia, Switzerland, the United Kingdom, and the United States discovered that several major banks had colluded for at least a decade to manipulate exchange rates on the foreign exchange (forex) market for their own financial gain.

In a majority judgment, the CAT ruled that two rival collective claims - known respectively as O’Higgins and Evans – that sought follow-on damages relating to the events were unsuitable for opt-out collective proceedings and should instead proceed on an opt-in basis. The CAT majority found various weaknesses with the claims but gave the claimants the opportunity to reformulate their cases as opt-in actions. This was also the first time the CAT decided a ‘carriage dispute’ – when a court must evaluate concurrent claims seeking damages for essentially the same competition law infringement and decide which is better placed to proceed.

The forex judgment (255 pages / 1.88MB PDF) suggests that the CAT may be more reluctant to approve collective proceedings on an opt-out basis when the underlying claimants are sophisticated commercial operators capable of defending their legal interests - rather than ordinary consumers. This is not necessarily a given, however, since in the McLaren v MOL claim, the CAT ruled that the collective proceedings should be brought on an opt-out basis, adding that there should be no sub-division of the class to require ‘large business purchasers’ to participate on an opt-in basis.

Both O’Higgins and Evans are expected to appeal the CAT’s decision – a process which is likely to be closely followed by prospective claimant group representatives and defendants alike. 

Apple v Kent

Last week, the CAT certified its fifth opt-out collective action. The decision allows a claim for up to £1.5bn to proceed against Apple after it was accused of excessive pricing against approximately 19.6 million UK app store users. Apple’s App Store charging practices, including the 30% commission it levies on purchases, are also the subject of ongoing antitrust scrutiny by competition authorities in the EU and UK.

The CAT ruling granted a CPO to Rachel Kent, the King’s College London lecturer who raised the claim against Apple. The court reserved publication of its full judgment for a later date. A series of competition claims against other major technology firms are currently pending before the CAT.

Court of Appeal ruling

Last week also saw the Court of Appeal dismiss an attempt by BT to overturn CAT’s certification of a class action claim against it on an opt-in basis. The Court of Appeal ruled that the country’s specialist competition tribunal has full discretion to certify a class action claim as opt-in or opt-out.

The CAT certified Justin Le Patourel’s £600mn damages claim against BT on an opt-out basis last September. Le Patourel alleges that the telecommunications company overcharged its fixed-line customers by up to £10 per month between 2015 and 2018.

Looking ahead

At the time of writing, there are 16 collective damages actions before the CAT, at different stages of the litigation process. These mass actions involve claims against major corporations across a range of industries including technology, financial services, commercial vehicles, and rail transport. This includes three proceedings - two involving related claims - where CPO hearings have concluded, and judgments are awaited.

A further follow-on damages claim has been announced against manufacturers of high-voltage power cables, including Nexans SA and Prysmian SpA, on behalf of up to 30 million domestic electricity consumers in the UK following a European Commission cartel infringement decision in 2014.

As the UK mass actions regime develops, focus is expected to shift away from ‘certification’, i.e. court approval, of opt-out collective proceedings. Instead, greater attention will be paid to substantive legal arguments at trial about causation and applicable defences - often involving complex economic analysis. 

Practical considerations for managing and mitigating risk

As discussed at Pinsent Masons’ Annual Competition Conference on 11 May 2022, businesses should develop strategies to proactively assess their mass actions litigation exposure, especially if found to have breached competition law where follow-on damages claims can be brought. Large companies, particularly in digital markets, are also increasingly susceptible to standalone claims.

For businesses subject to antitrust investigations, early mitigation strategies may include settlement with the competition authority. Settlement decisions are less detailed and therefore are less useful to claimants in follow-on claims or establishing voluntary redress schemes. 

When facing claims, business should consider carefully whether or not to actively defend CPO proceedings in the CAT. This would depend on the strength of dispositive legal arguments that can be made; as well as careful evaluation of associated cost, resource and reputational implications. 

Pre-CPO certification settlement requires CAT’s approval and remains untested in the opt-out collective proceedings regime. It may be worth considering settlement at ‘case management conference’ stage, once the relative strengths of legal arguments on both sides have been assessed.

Competition economists should be engaged as soon as possible by parties faced with competition class actions. This will help formulate effective defence arguments and strategies, and estimate potential financial exposure of the business.