Class action reform aims to help smaller businesses fight antitrust infringement
While the finality accorded by a judgment or settlement in a class action is generally regarded as good for businesses, the concept of class actions in its entirety remains anathema to most enterprises.
It’s surprising, then to discover that the UK’s new class action regime, introduced by the Consumer Rights Act 2015 and which came into force on October 1, 2015, advantages some companies, particularly small and medium enterprises, even more than it does consumers.
At the outset, however, it’s important to note that the UK scheme is not nearly as broad as its Canadian counterparts. It is limited to claims based on infringements of UK and European Union antitrust law, law firms may not bring claims on a contingency fee basis, and only “suitable representatives” can represent the class.
But while collective actions were in the past limited to “consumer claims,” that restriction has been removed.
“The introduction of the collective actions regime opens the door for small businesses and consumers to obtain compensation for losses suffered,” says Mark Simpson of Norton Rose Fulbright in London. “Such claims are often too small to justify expensive litigation, but the new procedure is intended to overcome this by allowing large numbers of smaller claims to be bundled together without requiring the individuals that might benefit from a damages award being involved in the conduct of the litigation.”
The overall effect, however, is that large businesses will now face greater litigation risk because potential classes can include the host of small businesses who might be adversely affected by the actions of a cartel.
Perhaps the most significant change, however, is that the new regime is an “opt-out” regime for UK-domiciled claimants. While this means that Canadian businesses who have no operations in the US will have to opt-in, that is not likely to be an onerous procedure. Otherwise, anyone who “will fairly and adequately act in the interests of class members” can bring an application to the Competition Appeal Tribunal, which has exclusive jurisdiction, for a collective proceedings order. The previous, more limited, regime allowed only specified bodies, largely consumer advocate organizations, to bring such claims.
The CAT will have jurisdiction not only in respect of “follow-on” claims based on findings of liability made by a competition authority, but also for stand-alone competition claims where the claimants must prove that competition law has been breached.
Only compensatory damages are available, with no provision for exemplary or punitive damages. CAT awards will be made on an aggregate basis and the tribunal will provide directions for how class members’ individual claims should be assessed.
Kirk Baert of Koskie Minsky LLP in Toronto, a veteran of the plaintiffs’ class action bar, says the UK system is flawed.
“Without a robust contingency regime lacking any amelioration for costs against the losing side, the new regime is unlikely to have any significant effect,” he says.
The details of the procedural rules are also potentially restrictive. Although the rules say that the collective action mechanism applies to claims arising before October 1, 2015, the new limitation rules do not apply to these claims. But the difficulty with the old rules, which continue to apply to pre-existing claims, is that claims cannot be brought until a competition authority’s infringement decision is final.
Historically, that’s taken a long while. The tribunal that deals with these matters most often is the European Commission. Appeals from the EC’s decisions are to the European Court of Justice, a tribunal that is notoriously slow.
“Matters can take five to six years to resolve,” Simpson says. “So while the new regime may be quite successful in the immediate term – though perhaps not as prominently as competition class actions in the US and Canada – any suggestion that there will be a flood of claims in the short-term is unlikely to be realized.”
Still, there’s no doubt that class action regimes, unthinkable in the UK and the EU as little as a decade ago, are beginning to emerge in various forms and countries. The upshot could be a massive jurisdictional problem in multijurisdictional cases, such as the ones emerging from the current Volkswagen diesel emissions scandal.
“In cases where there is a worldwide class of identical claims that could be done in any one of a number of countries, there will likely be a multiplicity of proceedings, which is inefficient and unfair to defendants,” Baert says. “But I don’t hold out much hope for resolving that issue: we’re having enough trouble coordinating class actions in Canada, where some 15 or 20 have already been filed against Volkswagen.”