Consumer Rights Act 2015: Promoting collective proceedings in competition damages claims

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Consumer Rights Act 2015 ("CRACATConsumer Rights Act 2015: Reforms to damages litigation in the UK for infringements of competition law") is set to reform the enforcement of competition law through the courts in the UK. The wide ranging reforms will make it easier for companies which have suffered harm as a result of an infringement of competition law both to bring a damages claim and, ultimately, to obtain compensation. In particular the reforms promote the UK's specialist competition tribunal, the Competition Appeal Tribunal (""), as the main forum to bring such claims (for more details see ).

One of the reforms introduced to make it easier for businesses and consumers to obtain compensation is the promotion of collective proceedings on behalf of groups of claimants. Collective proceedings are a type of class action in which a claim is brought by a representative on behalf of a certain category of claimants (for example, the victims of a particular infringement of competition law). They can be divided into two categories:

• Claimants to an opt-in collective action will only join collective proceedings when they actively assert membership to a class.
• Claimants to an opt-out collective action will automatically fall within a 'class' for the purposes of the proceedings unless they take the necessary prescribed steps to opt-out.

Under the current system only opt-in collective actions are permitted, once the CRA enters into force opt-out collective actions will also be permitted.

Collective proceedings can be an efficient mechanism because they negate the need for each individual party which has suffered loss as a result of an infringement of competition law to bring separate claims. Instead, a nominated representative, approved by the CAT, will bring the claim on behalf of a defined group of claimants who will then share the award of compensation. One notable difference from individual proceedings is that exemplary damages are not available in collective proceedings.

The implementation of opt-out collective actions

Under the newly proposed system, once a collective action has been filed with the CAT, the claim may only continue if the CAT makes a collective proceedings order ("CPO"). The CAT will only make a CPO if it considers firstly that it is able to authorise the person who brought the claim to act as representative in the collective proceedings and secondly, that the claims raise the same, similar or related issues of fact and law. The CPO itself must:

• Authorise a representative;
• Describe the class of persons eligible for inclusion in the proceedings; and
• Specify whether the proceedings are opt-in or opt-out.

Damages and settlements

The CRA also sets out the rules governing the award of damages in collective proceedings and makes provisions for the settlement of such actions. When making an award of damages the CAT will not be required to undertake an individual assessment with respect to the damages recoverable by each person represented by the collective action - the award will be made for the whole of the collective action and awarded to the representative on behalf of the individual claimants.

Under the new regime, the CAT will be able to approve settlements of collective actions where it considers the terms of a proposed settlement are just and reasonable. Once approved, a settlement will be binding on all people in the class defined by the CPO or by a settlement order, which will be issued by the CAT in instances where a settlement is reached before a CPO is issued.

New procedural rules for the CAT

In order to give effect to the CAT's new functions under the CRA, in March 2014 the CAT published draft procedural rules for collective proceedings and collective settlements setting out the precise scope of the CAT's power with respect to collective proceedings, CPOs and collective settlements. The draft rules concerning collective proceedings and settlements have been incorporated into the Draft CAT Rules 2015, published in February 2015 and are now subject to consultation by the UK Government's Department for Business, Innovation and Skills. To read more about the Draft CAT Rules see BIS publishes consultation on proposed amendments to the Competition Appeal Tribunal's rules of procedure.