Disputes 2016: Class actions

Competition claims

The coming of class action litigation to England and Wales has been more often predicted than the coming of the end of days, and the predictions have proved similarly accurate. In 2015, however, a new regime was finally created in the context of competition claims, enabling claimants to bring representative actions on both an “opt-in” basis, but more importantly also on an “opt-out” basis. Opt-in claims, where a representative brings a claim on behalf of people who choose to join the group, were already possible under s.47B of the Competition Act 1998 by a designated representative, but only Which?, the Consumer Association was designated, and it in turn brought only one case. Opt-out claims mean that claims can be brought on behalf of an identifiable group by an authorised representative, and will automatically include all UK-based members of the group unless they opt out of the claim. Non-UK claimants will be able to opt in. The Competition Appeal Tribunal (CAT) will now authorise representatives as part of its consideration of whether a case is suitable for collective action.

The new regime, introduced by the Consumer Rights Act 2015 (CRA 2015), took effect on 01 October 2015, expanding the scope of the CAT’s powers. As well as opt out collective actions, the revisions introduce into its jurisdiction, stand alone actions, collective settlements, injunctions, and fast track procedures. Separately, cases, or parts of cases, dealing with antitrust infringements can now be transferred into the CAT from the High Court. The first case to be transferred is the £100m claim by Sainsbury’s against MasterCard, which will now be heard by the CAT in a seven week hearing starting on 25 January 2016. For more on that case, see our article.

The full class actions regime will only apply to claims arising after 01 October 2015, meaning that cartel claims may take a while to come on stream, and a prohibition on the use of Damages Based Agreements in opt-out collective actions will make funding such claims more difficult. Marcus Smith, a chairman of the CAT, has reportedly indicated that he expects a “slowish start” but then, however, a “fairly dramatic increase” in collective claims being brought in the CAT subsequently. A small collective action is anticipated as a test case in 2016. In the case of abuse of dominance cases, however, there is more scope in the short term for cases to be brought, and applications to the CAT for interim injunctions are likely to become more widespread. The application for a damages action to be heard under the fast track procedure and for an injunction is already underway in the NCRQ Ltd v Institution of Occupational Safety and Health case. The injunction hearing is scheduled for 12-13 January 2016.

For more on the new powers of the CAT, see our article.

Other collective actions

A number of factors suggest that there is likely to be an increase in the volume and size of collective actions brought in England more generally. The key factors informing that prediction are as follows:

• The Financial Services and Markets Act 2000 (FSMA) contains a number of provisions which would allow an aggrieved consumer or customer to claim damages against an authorised firm and/or the persons responsible for any breach or misleading or dishonest disclosure, depending on the circumstances.
• The general increase in regulatory enforcement action against firms in the UK means that a great deal of the underlying factual material required to establish a claim is being made public as part of regulatory investigations.
• A renewed focus on corporate transparency means that instances of corporate wrongdoing are becoming more widely known and at an earlier stage.
• In recent years there has been a relatively rapid improvement in the coordination, management and funding of collective actions in the UK. A number of sizeable law firms are at the forefront of trying to coordinate the largest collective actions currently being formed in the UK, and there are now a large number of litigation funders and insurers in the market supporting collective actions.
• As management, coordination and funding of collective actions improves, institutional investors may feel more comfortable participating in such actions.

An increase in actions under Group Litigation Orders, including against household name companies such as Tesco and Royal Bank of Scotland, is likely to lead to an increased interest in such actions.

For more on class actions and collective redress around the world, see our new microsite.