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Government announces changes to competition litigation in the UK

Briefing note

January 2013

Government announces changes to competition litigation in the UK


The Government has announced changes to some aspects of competition litigation in the UK following a consultation in 2012. The changes include extending the Competition Appeal Tribunal (CAT)'s jurisdiction to hear stand-alone actions, introducing a limited opt-out collective actions regime for competition law, promoting Alternative Dispute Resolution (ADR) to ensure that court actions are an option of last resort and ensuring that private actions complement the public enforcement regime.
New powers for the Competition Appeal Tribunal
Currently, the CAT hears "follow-on" cases, after an infringement decision has been issued by the European Commission or the Office of Fair Trading ("OFT"). The Government is extending the jurisdiction of the CAT so that it can hear "stand-alone" claims which are at present heard only by the High Court. The courts will be able to transfer competition cases (both stand-alone and follow-on) to the CAT and vice versa. The CAT will have the power to grant injunctions, and a fast-track procedure will be introduced for simpler competition claims in the CAT. It is intended to benefit SMEs, and the CAT will seek to prioritise cases involving companies which would otherwise find it more difficult to obtain access to justice. However, there are to be no absolute limits on who can bring a fast-track case. The limitation periods for the CAT are to be harmonised with those of the High Court of England and Wales, the High Court of Northern Ireland and the Court of Session in Scotland, as appropriate. This means that a sixyear limitation period will apply to all private action cases in the CAT brought in England and Wales and Northern Ireland, whether stand-alone or follow-on, while in Scotland the limitation period will remain five years, in line with the Scottish Court of Session. The Government had consulted on whether to introduce a rebuttable presumption of loss in cartel cases i.e. to say that the infringing conduct affected prices by a fixed amount, such as 20%. The aim of the proposal was to shift the burden of proof to those likely to possess the data required to accurately assess the quantum of price increases, but the Government has decided against this measure. The Government has also decided not to address the passing-on defence in legislation pending EU legislation on antitrust claims.

Key issues
New powers for the Competition Appeal Tribunal A new right of collective action Promoting ADR to save time and cost Ensuring private actions complement the public enforcement regime

A new right of collective action


The wisdom of introducing a collective actions regime into the UK has been much debated over the last few years, but the Government has decided to introduce a limited opt-out collective actions regime, with safeguards, for competition law. The regime would apply to both follow-on and standalone cases, with cases to be heard only in the CAT. Perhaps because of the controversy about importing US-style "class actions" into the country, the new

Government announces changes to competition litigation in the UK

plans have several safeguards against the perceived disadvantages of US actions. The CAT will be required to certify whether a collective action brought under the new regime should proceed on an opt-in or optout basis. The underlying claimants in such a case will be able to be either consumers or businesses, or a combination of the two. Claims will be able to be brought either by claimants or by genuine representatives of claimants such as trade associations or consumer associations but not by law firms, third party funders or special-purpose vehicles. There will also be safeguards including a process of judicial certification (including a preliminary merits test), the opt-out aspect of a claim only applying to UK-domiciled claimants, a prohibition on treble or exemplary damages (one of the mostcriticised aspects of US class actions), the application of the loser-pays rule in the assessment of costs and expenses (also unknown in the US, where class action defendants often face frivolous claims from claimants who have only their own costs to bear), a prohibition on contingency fees and the payment of any unclaimed sums to the Access to Justice Foundation. Additionally, any opt-out settlement will have to be judicially approved. There is also to be a new opt-out collective settlement regime for competition law in the CAT, similar to the system in the Netherlands, to allow businesses to quickly and easily settle cases on a voluntary basis.

Authors

Elizabeth Morony Partner, London T: +44 20 7006 8128 E: elizabeth.morony @cliffordchance.com encouraged by the courts to consider it early in proceedings. The Government has decided to strongly encourage ADR in competition cases, but has stopped short of making it mandatory. It will align the CAT rules governing formal settlement offers (Calderbank letters) with those of the High Court. As noted in respect of collective actions, there will be a new opt-out collective settlement regime for competition claims in the CAT. Additionally, the OFT will be able, when a company has been found to have infringed competition law, to certify a voluntary redress scheme, but not to impose one. Those who offer a redress scheme could qualify for a possible reduction of fine, in accordance with the OFT's current guidance. The Government decided against introducing a pre-action protocol in competition cases, at least partly because many respondents to the consultation had raised concerns about an infringing party being put on notice of potential legal proceedings by receipt of a pre-action protocol and then starting its own proceedings in another European state. Under

Luke Tolaini Partner, London T: +44 20 7006 4666 E: luke.tolaini @cliffordchance.com European law, once a case has been started in one member state, it cannot be started in another one.

Ensuring private actions complement the public enforcement regime


The Government has decided to wait for the European Commission's proposals in this area, which are expected in the next few months, and only to publish its own proposals if nothing is produced by the Commission. However, it is acting to help ensure that consistency is maintained between the CAT and the Competition and Markets Authority (CMA) by amending the CAT Rules to provide that it is required to notify the CMA when private action cases are initiated, amending the CAT Rules to provide an explicit power for the OFT/CMA to act as an intervener, where appropriate, in competition claims and ensuring that the CAT has the power to stay cases before it which are also being investigated by a competition authority.

Promoting ADR to save time and cost


ADR is already encouraged in general civil litigation, with litigants

Government announces changes to competition litigation in the UK

This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.

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