This article was written by Sarah Persky (associate).
The Consumer Rights Act 2015 (Consumer Rights Act), which came into force on 1 October 2015, introduced a number of measures that were aimed at widening the types of competition cases that the Competition Appeal Tribunal hears (CAT) and thereby increasing private enforcement of competition law infringements in England and Wales. Since 1 October 2015, the CAT has had jurisdiction to hear stand-alone actions (as well as follow-on actions) pursuant to section 47A of the Competition Act 1998 (Competition Act) and a new "fast-track" procedure is available for qualifying claims brought after 1 October 2015.
Although it is still early days for the new regime, a number of claims which would previously have been outside of the scope of the CAT’s jurisdiction have already made their way to the CAT. In particular, the High Court has already transferred two claims to the CAT under the new regime and a number of stand-alone claims have been issued in the CAT. Additionally, the CAT has already initiated the fast-track procedure in respect of three claims (two of which settled within a month of being issued and before the first case management conference). It has also rejected an application to allocate a case to the fast-track procedure and, in doing so, helped to identify the parameters of the fast-track procedure. Two collective actions are now also underway in the CAT.
1. Transfers from High Court to CAT.
The Section 16 Enterprise Act 2002 Regulations 2015 (Regulations), which came into force on 1 October 2015, enable the High Court to transfer proceedings which involve an infringement issue relating to Chapter I or Chapter II of the Competition Act or Article 101 or 102 of the Treaty on the Functioning of the European Union (TFEU) to the CAT for its determination.
On 30 November 2015, the High Court made its first transfer to the CAT pursuant to section 16 of the Enterprise Act 2002 and the Regulations in Sainsbury’s Supermarkets v MasterCard, a stand-alone claim involving an alleged infringement of Chapter I of the Competition Act and Article 101 of the TFEU. The High Court judge considered such a transfer was appropriate because of the CAT’s expanded jurisdiction, including to hear stand-alone damages actions, and the introduction of the Regulations. The judge also considered the specialist expertise of the CAT panel and support staff would be of considerable assistance in understanding and resolving the difficult issues which are a common feature of competition litigation. The CAT is also in a position to draw on the assistance of experienced judges who have heard competition law cases in both the High Court and the CAT, since High Court judges of the Chancery Division have regularly sat in the CAT and been appointed as CAT Chairman and section 82 of the Consumer Rights Act facilitates the appointment to the CAT of suitably qualified judges sitting in any Division of the High Court (and its equivalents in Scotland and Northern Ireland). This helps to maintain continuity in cases where proceedings are at an advanced stage when transferred. The judge considered that the complexity of the issues in the case, which would likely require considerable economic evidence and argument, made it suitable to be heard in the CAT. The judge also helpfully clarified that Rule 119 of the 2015 CAT Rules, which states that proceedings commenced before the CAT prior to 1 October 2015 continue to be governed by the 2003 CAT Rules, only relates to claims originating in the CAT and not to claims transferred from the High Court. In July 2016, the CAT handed down its judgment finding that MasterCard’s UK multilateral interchange fee infringed Article 101(1) of the TFEU and it awarded damages of approximately £68.6 million (plus interest). This was the first major interchange fee decision in the CAT.
A number of additional claims have been commenced against MasterCard in the CAT during the course of this year, pursuant to section 47A of the Competition Act, based on the European Commission’s 2007 decision that MasterCard’s EEA interchange fees infringed Article 101 of the TFEU. The claims have been brought by DSG Retail Limited, Dixons Retail Group Limited and some of its subsidiaries, Dixons Carphone plc, Europcar UK Limited, British Airways and Transport for London. A collective action has also been brought against MasterCard by Walter Hugh Merricks CBE (on behalf of 65 million customers) pursuant to section 47B of the Competition Act.
In April 2016, the High Court rejected an application by Samsung to transfer competition law issues raised in patent infringement proceedings in Unwired Planet International v Huawei Technologies, which involved an alleged infringement of Article 102 of the TFEU, from the Patents Court to the CAT. The judge considered that no transfer should be made without some positive reason for doing so. The proceedings as a whole, including the competition law issues, were all about telecommunications patents and patent licensing. Further, certain interrelated issues would need to remain in the High Court and splitting the issues between the CAT and the High Court would be impractical and would create a division in the handling and decision making process.
More recently, in July 2016, the High Court transferred to the CAT competition issues arising in Agents’ Mutual Limited v Gascoigne Halman and Agents' Mutual Limited v Moginie James Limited, both of which are stand-alone claims in which the claimant is alleging an infringement of Chapter I of the Competition Act. The trial is due to commence in February 2017.
2. Fast-track procedure
The fast-track procedure is intended to enable less complex claims to be resolved quickly and at lower cost, particularly (although not exclusively) where the claimant is a small or medium-sized enterprise. The CAT may allocate a case to the fast-track procedure of its own initiative or on the application of a party, if the CAT considers it appropriate to do so in the circumstances. Rule 58(3) of the CAT Rules 2015 sets out a non-exhaustive list of matters which the CAT shall take into account when deciding whether to allocate a claim to the fast-track procedure, including:
- whether one or more of the parties is an individual or a micro, small or medium-sized enterprise;
- whether the time estimate for the substantive hearing is three days or less;
- the complexity and novelty of the issues;
- whether additional claims have or will be made in accordance with rule 39 (i.e. a counterclaim, a claim for contribution, indemnity or another remedy and/or an additional claim against a third party);
- the number of witnesses involved (including expert witnesses, if any);
- the scale and nature of the documentary evidence involved;
- whether any disclosure is required and, if so, the likely extent of such disclosure; and
- the nature of the remedy being sought and the amount of any damages claim.
Claims that are allocated to the fast-track procedure must be heard within six months of allocation to fast-track and will be subject to a cap on recoverable costs at a level determined by the CAT.
(a) Abuse of dominance cases
To date, the cases which have been allocated to the fast-track procedure have involved claims of an abuse of a dominant position. The first claim that was assigned to the fast-track procedure was NCRQ Ltd v Institution of Occupational Safety & Health, in which the claimant alleged that the defendant had abused a dominant position in breach of Chapter II of the Competition Act and Article 102 of the TFEU. This was also the first stand-alone damages action to be brought before the CAT. Within one month of the claim being brought, the CAT published an order consenting to its settlement. Similarly, in the next claim that was assigned to the fast-track procedure, Shahid Latif and Mohammed Abdul Waheed v Tesco, a stand-alone claim in which it was alleged that a restrictive covenant in a land agreement constituted a breach of the Chapter I and/or the Chapter II prohibition of the Competition Act, the claim settled within one month of being issued. These two claims indicate that the fast-track procedure may be an effective tool for bringing about the quick resolution out of court of less complex claims.
The most recent claim which has been allocated to the fast-track procedure, Socrates Training Limited v The Law Society of England and Wales, is also a stand-alone claim involving an alleged breach of Chapter II of the Competition Act by The Law Society. This is the first first-track claim which has proceeded to trial. On 16 May 2016, the CAT ordered that the issues arising in the proceedings be split, with liability being determined first and the quantification of damages to be heard subsequently. A cap on recoverable costs was put in place on 23 June 2016, but the amount of the cap was increased on 11 November 2016. The hearing on liability began on 8 November 2016 and judgment is awaited.
(b) Fast-track procedure less suited for follow-on damages claims
The CAT dismissed an application to allocate a claim to the fast-track procedure for the first time in Breasley Pillows v Vita Cellular Foams. Unlike the claims which were successfully allocated to the fast-track procedure, this claim is a follow-on damages action arising out of the European Commission's finding that four major producers of flexible polyurethane foam had participated in a cartel from October 2005 until July 2010. Mr Justice Roth (the President of the CAT) rejected the application on a number of bases. First, Mr Justice Roth noted that the trial would raise a wide range of factual issues and it seemed likely that the trial would take at least two weeks. The claimants had submitted that the three day hearing guideline set out in Rule 58(3) applies per claimant, so the effective overall threshold in this case (involving six claimants) should be 18 days. Further, if only one of the six claimants had sued, the case could be heard in three days, so the claimants should not be prejudiced by reason of having come together to bring the claim since this was in some ways more efficient. Mr Justice Roth rejected this approach as fundamentally misconceived and emphasised that the three day guidelines is for the trial of the case irrespective of the number of claimants.
Additionally, Mr Justice Roth considered that the scale and scope of the disclosure which will be sought by the parties is well beyond what is commensurate with the fast-track procedure. He note that there was nothing urgent about the claim, given that it was only issued very close to the end of the limitation period after the European Commission's decision became final. Mr Justice Roth also rejected the claimants' submission that, as a matter of principle, the CAT should always seek to allocate cartel follow-on damages actions to the fast-track procedure unless there are compelling reasons not to do so. He referred to paragraph 5.146 of the CAT’s Guide to Proceedings, which notes that it is unlikely that the CAT will designate a competition case as suitable for the fast-track procedure unless it is a clear-cut candidate for such an approach, and commented that a case concerned with damages for a cartel of several years' duration is unlikely to fall within the criteria for the fast-track procedure. He suggested that, in rare instances, follow-on actions could qualify for fast-track where:
- the claimants were direct purchasers from cartelists and also the end consumer, so no question of pass-through arises;
- the competition authority has gone some way to quantify the effect of the cartel on prices in its decision in a manner that would effectively bind the CAT in a damages action; or
- the claimants have circumscribed their claim to the overcharge by cartelists in the cartel period itself.
Finally, Mr Justice Roth observed that, while he sympathised with the claimants' concern about costs running to several millions of pounds when they quantify their claim at less than £9.5 million, the fast-track procedure is not designed to be the remedy for all concerns about costs. He suggested that the cost problems of bringing follow-on damages may need to be addressed by resort to various funding mechanisms such as conditional fees or damages-based agreements and not by recourse to the fast-track procedure.
This case is a useful reminder of the ambit of the fast-track procedure. It is clear from this case that follow-on damages actions will only very rarely be suitable candidates for the fast-track procedure.
3. Conclusion and next steps
The above cases indicate that the measures introduced by the Consumer Rights Act have been effective in putting the CAT in centre stage for handling private actions for competition law infringements. This is a trend which is likely to continue over time.
The fast-track procedure is emerging as an appealing option for aggrieved parties to obtain quick and direct recourse for competition law infringements, as opposed to making a complaint to the Competition and Markets Authority (CMA). The CMA exercises its administrative discretion in deciding which complaints to pursue and its investigations are often lengthy with little ability for complainants to influence the direction of the investigation or its outcome.
In May 2016 the Department for Business, Innovation & Skills (BIS) launched a consultation to consider what further improvements can be made to the UK's competition regime. The deadline for responding passed on 24 June 2016. In July 2016, BIS was replaced by the Department for Business, Energy & Industrial Strategy (BEIS) following the referendum vote in favour of Brexit on 23 June 2016. It will be interesting to see what action, if any, the UK government takes following the consultation and in light of Brexit-related developments.
The EU Directive 2014/104 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and the EU (“Damages Directive”), which seeks to simplify and harmonise rules across the EU for private damages actions arising from infringements of Articles 101 and 102 TFEU, must be implemented by all current EU Member States (including the UK) by 27 December 2016. In January 2016, BIS consulted on implementing the Damages Directive in the UK and found that relatively limited changes to UK substantive law and procedures would be required in light of the reforms introduced by the Consumer Rights Act. It is expected that implementation of the Damages Directive in the UK will require some amendments to the Competition Act, the Civil Procedure Rules and the CAT Rules.
Dorothy Gibson v Pride Mobility Products Limited and Walter Hugh Merricks CBE v Mastercard.