Overview
The UK Government recently announced its intention to review the UK's antitrust class action system, including launching a consultation on the future of the regime.
This represents the latest in a series of pro-business course adjustments taken by the Government to reposition the UK as 'open for business' after a period of over-enforcement by the country's antitrust regulator, the Competition and Markets Authority (CMA). That kicked off earlier this year with the firing of the agency's then chair, Marcus Bokkerink, and a stern pro-business warning to the remaining leadership to conduct a root-and-branch review of the enforcer's approach to business, subsequently codified in the Government's 'strategic steer', which placed the need for economic growth above all other priorities. This in turn led to a plethora of missives from the CMA promising a friendlier approach to business, including the introduction of the '4 Ps', a new 'mergers charter', a consultation on the agency's approach to merger remedies, and myriad revisions to existing guidance and practice (including digital markets regulation, mergers procedure and markets investigations) to make everything '4 P' ready.
Now, the Government has turned its attention to the UK's Competition Appeals Tribunal (CAT), which oversees the antitrust class action regime, which recently celebrated its tenth year. The public engagement – led by the UK's Department for Business and Trade (which also oversees the work of the CMA) – kicked off on 6 August in the form of a 31-question consultation.
This is the first salvo directly focused on the country's class action regime, which was introduced by the Consumer Rights Act 2015, amending section 47 of the Competition Act 1998. The regime got off to a rocky start following the denial of the first application for a Collective Proceedings Order (CPO), in Gibson, in 2017 and the subsequent withdrawal of that claim. Similarly, the high bar for certification initially established by the Tribunal in Merricks discouraged a number of applicants from pursuing claims through that forum. However, the Supreme Court's Judgment overturning that approach and setting a much lower bar for establishing eligibility to act as class representative, and the growing availability of litigation funding, has led to a relative explosion in cases. To date, almost 60 CPOs have been filed with the CAT, and over 25 have been certified, although only a small number have reached trial.
The UK Government is now asking whether the regime strikes the right balance between its founding principles (ie to enable direct consumer and customer redress and deter bad behavior) and the need to avoid being "disproportionately burdensome on business."
While the questionnaire mentions the availability of other tools, such as alternative dispute resolution and voluntary redress schemes and the need to reconsider the threshold for establishing eligibility to appoint class representatives, its main focus is on funding, the role of funders and the growing concern that large parts of unclaimed payouts may never reach affected class members but simply be re-absorbed by funders.
Throughout, the questions focus on the recurrent theme of the role of funders as drivers, and beneficiaries, of the regime:
"Q2. Do you consider the way litigation funders' share of settlement sums or damages awards is approached currently to be fair and/or proportionate?"
"Q4. How has the secondary market in litigation funding developed? Do you consider that there have been any subsequent impacts on transparency and client confidentiality?"
"Q5. Are funding agreements fair and transparent for class members and clear for the court to understand?"
"Q21. What degree of influence, if any, do you consider litigation funders currently have over the resolution of a case?"
"Q26. What should happen to unclaimed funds from a settlement agreement?"
"Q27. How are funds distributed among consumers?"
"Q29. The quantum of damages can vary from case to case. For example, out of the recent Merricks settlement of £200 million, £100 million was set aside for class members. Of this, individual class members can expect to receive approximately £45 each and no more than £70. To what extent do you consider that this return is meaningful for individual class members?"
"Q30. What should happen to unclaimed or residual damages?"
This is not neutral language. The overall framing of the consultation strongly signals the Government's intention, at the very least, to raise the bar once again for certification, to incentivize earlier settlements, if not to do away with the regime altogether. While it nods to deep-seated concerns, building since the regime's inception, that the actual take-up of damages by the affected class, once awarded, may be as low as 20-30% (or possibly lower still), it is the new geo-political reality in which the UK finds itself that has likely spurred this review.
Stepping back, the recurrent appearance in class actions launched in the CAT of Amazon, Apple, Google, Meta and other tech companies, alongside the more domestic mix of banks, card companies, telecoms providers, train companies and water suppliers, is highly relevant context for this latest announcement. The current US Administration has repeatedly raised concerns with regulatory and tax regimes in the UK and Europe, which appear to disproportionately focus on American tech companies, whether in the form of the Digital Services Act, the Digital Markets Act, the Digital Services Tax, or collective regimes like those found in the UK, the Netherlands and Portugal. These have gradually merged into trade negotiations. Most recently, the US has gone as far as to threaten sanctions on the European Union (EU) or EU officials that continue to operate these regimes, an overt statement that belies back-room negotiations over the past six months that have indirectly led to a number of row backs of actions against American tech on both sides of the English Channel.
With all this in mind, this is more than just another consultation. For the many companies on or expected to be on the sharp end of a class action claim stretching into the tens of millions, or even billions, of pounds, they would be well-advised to make their views known by responding to the consultation and to support efforts to reform the regime in a manner which will refocus if not entirely redirect future claims.
Please reach out to the authors, Ronan Scanlan and Yumiko Takahashi, or to other members of Steptoe's antitrust team if you would like support in making such a response or wish to discuss this review and its potential impact on your business.
Interested parties have until 14 October to respond.
*Disclosure notes: Steptoe's London competition team recently defended a client in a competition class action brought in the CAT (Case 1339/7/7/20 Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others), one of the first claims filed in the CAT to proceed to trial.
Please note that the views expressed in this blog post are those of the authors and do not necessarily represent Steptoe LLP or its clients.
