27 Apr 2012

(by Sebastian Peyer) Private antitrust enforcement in the UK has never got off the ground, even after the Competition Act of 1998 introduced enforceable antitrust provisions. Plaintiffs have not been able to secure a final judgment awarding damages for anticompetitive conduct, and very few based on competition law have been successful before UK courts. The consumer organisation Which? brought the only consumer group action joining fewer than 0.1 percent of the affected consumers and before settling the case with JJB Sports. An attempt by under the existing Civil Procedure Rules failed. Against this background of unsuccessful private enforcement, the UK Department for Business Innovation and Skills (BIS) this week launched its . Reform is long overdue, but have they got it right?

Currently, the Competition Appeal Tribunal (CAT) only adjudicates on damages actions following public decisions. This severely limits the number of cases that are being brought before it. According to BIS’s preferred option, the CAT will gain powers to deal with all competition law claims including stand-alone actions. It will also be able to order permanent and interim injunctions. The government also favours a streamlined procedure for small and medium-sized companies in the CAT, for example, capping court fees, limiting time-consuming oral hearings, and potentially waiving the cross-undertaking in damages normally required to obtain injunctions.

Making the CAT the main forum for private actions would correct the artificial divide between follow-on action benefitting from the CAT’s expertise and stand-alone cases being brought before the High Court. Trimming the procedure, especially for small-value cases, seems to be an appropriate remedy to reduce cost and complexity which, in turn, will encourage victims to ask for a court-imposed remedy against anticompetitive conduct. Extending the CAT’s powers to award injunctions and lowering the threshold for obtaining injunctive relief is also a substantial improvement. Injunctions help businesses in other jurisdictions, for example , quickly to resolve disputes.

The streamlined court proceedings before the CAT are to be supplemented by alternative dispute resolution (ADR). Although the government seems to be reluctant to make ADR mandatory it feels that it should be ‘strongly encouraged’. This sounds superficially sensible, but what would plaintiffs really gain using ADR? Most business plaintiffs are likely to use the courts as a means of last resort after negotiations with the defendant have failed. To ‘encourage’ parties to go back to the bargaining table once more seems like a waste of resources. Promoting ADR thwarts the expected cost and time benefits from the streamlined CAT procedure by erecting a new hurdle in front of potential claimants.

There is some consideration of the role of the new Competition and Markets Authority (CMA). It is proposed that the CMA should encourage firms to set up redress schemes for consumers as a form of settlement. Another issue is more delicate. BIS acknowledges the need to protect the CMA’s leniency programme through non-disclosure of documents created especially for the leniency application. It also proposes to protect leniency recipients from joint and several liability. Imposing such limitations on follow-on actions is justified as those actions would not take place without the preceding public investigation. It is a cup half full that might be empty without the protection of the leniency programme. It is also no impediment to stand-alone private actions (which are currently so rare anyway).

Other proposals include an opt-out model for collective actions for both follow-on and stand-alone cases. Also, in order to avoid ‘bounty-hunter’ driven litigation, the government proposes limited standing restricted to bodies “which could reasonably be considered as representative”. Representative or class actions are a useful tool to obtain redress for many victims with small individual losses. It is sensible to regulate crucial elements of collective actions, for example the certification of the class, through legislation rather than in piecemeal fashion by the courts. On paper, the government’s preferred option seems to be able to balance the benefits and risks of class litigation but a final assessment will require further analysis. The proposed is discussed in a separate blog posted by Bruce Lyons.

Overall, the proposals in the consultation are a laudable attempt to reform private actions. Previous reform ideas by the European Commission have almost exclusively focused on damages actions. This consultation implements alternative remedies, particularly injunctions, and recognises the complementary function of private actions, especially when brought as stand-alone claims. It provides a useful additional role for the CAT. Apart from the misplaced ADR consideration, the BIS consultation is a well-structured attempt to address some of the specific problems of private antitrust litigation in the UK.