At this year’s Commercial Litigation Summit, competition litigators and funders discussed the status of the UK’s Competition Appeal Tribunal (CAT). Seven years have passed since the CAT was overhauled, enabling it to hear a wider range of private damages claims.
There was one important question on the panel’s agenda: is 2022 the year that the CAT is finally realising its potential?
General view of the current status of the regime
The panellists noted that the CAT regime is at an exciting time in its lifecycle, as mammoth consumer claims increasingly test and define the boundaries of competition class actions. Recently certified cases such as Le Patourel v BT – alleging abuse of dominant position via imposition of unfair prices – involve more than 2 million claimants seeking hundreds of millions in damages.
It was clear to the panel that the current environment is claimant-friendly, encouraged by case law which has reiterated a ‘low’ bar to certification. Third-party funding has also played a role in providing equality of arms to class members who would not otherwise be able to bring a claim. This has led to heightened interest in using the CAT as a vehicle for large consumer claims – as Deba Das noted (partner, Freshfield’s antitrust litigation team) the regime is “certainly moving into fifth gear”.
Given the Court of Appeal’s apparent frustration with some arguments being deployed by defendants at certification, David Gallagher (Counsel, Geradin Partners) said that it is “not surprising some defendants have started conceding certification”.
Going forward, the panel considered that future clashes in the CAT will be focused more on issues other than certification: particularly issues like settlement and distribution of damages.
Does the size of the claim matter?
Is there such a thing as too large a claim under the CAT regime? No, was the panel’s conclusion, pointing to the willingness of the CAT to certify the Merricks case a second time around, to the potential benefit of 46 million claimants seeking £14 billion in damages, backed by funding of around £45 million.
However, large private competition claims do present unique challenges. For example, if a claim like Merricks is successful, how do you manage the distribution of rewards to potentially millions of claimants?
Sarah Houghton (Partner, Mishcon de Reya, head of EU and Competition Group) considered there is a “real concern that if you begin to see vast claims made up of vast numbers of very small individual claims developing, the distribution costs will undermine the value of the regime.”
The panel observed how the question of distribution has long vexed jurisdictions with mature class action regimes. Often it can be difficult encouraging claimants to actually claim their damages, even when they are substantial. The panel noted a worrying study in 2015 which suggested many cases in the United States have take-up rates of less than one percent.
But the US is a different regime and lawyers have identified innovative ways to pay claimants their share of damages, such as credits to accounts. As Sarah Houghton concluded, ultimately “the distribution of large sums of money is not a new concept. This has been an aspect of insolvencies in the UK for many years and of class actions in other jurisdictions.”
How do you build a better case, ensuring a greater number of claimants sign up?
The panel also discussed the ingredients for a good case in the CAT. It was observed that a good case is built not only on a healthy damages pay-out to claimants, but also on having a broader value to society and the rule of law.
A key aim underlying the CAT regime is to modify the behaviour of lawbreaking companies. David Gallagher highlighted the deterrence effect of competition enforcement action by the Competition and Markets Authority (CMA): for each cartel uncovered by the regulator, between 5 and 28 cartels were deterred.
Given the finite resources of the CMA to pursue cases, UK competition enforcement has increasingly relied on private actions by individuals and companies to fill the gap. The best private actions will only proceed if founded on a robust cost-benefit analysis, ensuring that actual and potential wrongdoers modify their behaviour to take full account of the harm they may be causing to society.
