02 October 2015

Consumer Rights Act 2015 brings American-style class action regime

On 1 October 2015, the Competition Appeal Tribunal Rules 2015 (the CAT Rules 2015), entered into force pursuant to section 81 of the Consumer Rights Act 2015 (CRA). The CRA amends the Competition Act 1998 so as to implement significant reforms to competition law private actions.

The most significant of these changes is that it is now possible to bring an American-style class action in the UK. The CAT Rules 2015 set out how collective damages actions can now be brought on an “opt-out” basis, where a claim is brought by a representative on behalf of each class member, unless that member has notified the representative that they do not want to be included in the claim.

The Government department for Business, Innovation & Skills sees this step as particularly beneficial for small businesses and consumers, who were previously unlikely to bring claims in respect of relatively small losses. Businesses can now expect many more collective claims in the future, in comparison to the one action brought under the old opt-in system. Importantly, the new regime will apply retrospectively, enabling claims to be brought in respect of competition law infringements which have already been ruled upon by UK and European courts.

The UK system is more reserved in terms of damages, however, as there will be no US-style treble or exemplary damages. This is thought to ensure that only ‘true’ compensation is awarded and should discourage frivolous claims. Also, unclaimed damages will be given to charity and not back to the defendant.

The new class action regime puts businesses in breach of competition law at a much greater risk of facing large pay-outs to those affected.

Other changes to the CAT Rules 2015

The additional changes to the CAT rules aim to streamline the appeals process whilst providing proper accountability in a cost efficient and timely manner. In light of this, the revisions begin with the addition of five governing principles, geared towards providing just, proportionate and expeditious case management.

These principles are accompanied by more specific modifications, including the following notable changes:

  • Strike out power: the CAT now has the power to strike out cases on the basis of lack of jurisdiction.
  • Evidence: a new rule will be introduced which requires both parties to make a statement identifying any new evidence they wish to adduce at the appeal stage. The statement should be concise, relate only to substantive evidence and will be included in the appeal notice or defence, as appropriate.
  • Amendment of Notice of Appeal: the CAT was previously restricted when it came to amending appeal notices. A new rule enables the CAT to consider the circumstances of the case when deciding whether an amendment should be allowed. One motivation behind this change is to reduce satellite litigation regarding permissible amendments and enable the parties to focus on progressing with the case.
  • Settlement: rules similar to Part 36 of the Civil Procedural Rules are incorporated to advance the settlement regime.
  • Fast track procedure: the CRA provides the CAT with jurisdiction to create a fast-track procedure. The Government sees this as being of particular relevance to consumers and small businesses who will benefit from an accelerated, low cost process. Under this timeline, the aim is to have a final hearing within six months and a maximum trial length of three days. The CAT will assess eligibility for the fast-track procedure on an individual case basis, with extensions to this benchmark timetable being appropriate only in exceptional circumstances.

As part of the fast-track procedure, the CAT is able to grant interim injunctions either without the requirement of an undertaking as to damages, or with a cap on such an undertaking, where this would be in the interests of justice.

The CAT Rules 2015 aim to facilitate case management by including new general principles, new rules on evidence and new rules on disclosure and settlement offers in private actions. The CAT Rules 2015 also introduce various provisions on collective damages actions such as those referred to above.

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