On 1 October 2015, the competition law provisions of the Consumer Rights Act 2015 (CRA) came into force.
One of the key changes made by the CRA includes the introduction of ‘opt-out’ class actions before the Competition Appeal Tribunal (CAT).
Bringing claims on behalf of groups of individuals for breaches of competition law is not a new concept in the UK. In 2002, the CAT was given the power to hear ’opt-in’ collective claims in relation to competition law infringements. This meant that damages could be recovered for all members of a class who have consented to be included in a collective claim.
To date, the opt-in procedure has only been used in one case, following on from JJB Sports and other sportswear retailers being fined by the UK’s competition authority for fixing the prices of replica football kits.
In 2007, Which?, the Consumers’ Association, brought a claim against JJB on behalf of consumers who had bought football shirts between certain periods in 2000 and 2001. In 2009, JJB settled the case.
Under the settlement, consumers who had joined the claim and bought certain England and Manchester United football shirts could receive up to £20 each. JJB also agreed to compensate consumers who had bought the relevant shirts, but who had not opted-in to the claim, up to £10.
Despite there being thousands of potential claimants and the claim involving a high-profile consumer product with a relatively high value, take-up for the compensation was low with only 130 individuals being named on the claim form and the proceedings resulted in a settlement that was ultimately worth substantially less than the costs involved in bringing the proceedings themselves.
Which? highlighted the many practical difficulties with bringing opt-in claims and queried whether the costs and time associated with such claims were ultimately worth the outcome given the low value of the individual payouts.
The new ‘opt-out’ collective procedure means that claims may be brought on behalf of a class of claimants with defined common characteristics irrespective of whether they have chosen to be a part of the claim. All UK-domiciled parties falling within the class will be bound by the outcome of a claim unless they actively opt-out of the class.
In addition, non-UK domiciled individuals and businesses may participate in the proceedings and indeed any settlement if they actively opt-in to the claim. Opt-out claims will be heard by the CAT only and will apply in parallel to the existing opt-in procedures before the CAT. It is instructive to consider how the Which? claim may well have resulted in a very different settlement had it proceeded on an opt-out basis.
The introduction of opt-out class actions will make it easier and more cost-effective to bring collective actions. Some critics have raised concerns that the new opt-out model may open the floodgates to unmeritorious US-style class actions. However, safeguards have also been put in place in order to ensure that the perceived ’excesses‘ of a US-style class action culture are not replicated as a result of these provisions, including a certification procedure by the CAT.
Lesley Farrell is a partner and Ludmilla Le Grand Hamblin is an associate at Eversheds.