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Opting in: Consumer Rights Act ushers in class action model in much touted competition reforms

The Consumer Rights Act 2015, which comes into force today (1 October), will for the first time establish a procedure for class actions for competition claims, giving consumers and small businesses an easier route to success for claims made over anti-competitive behaviour, including price fixing and market sharing.

The legislation, which gives a number of new powers to the UK’s specialist competition court the Competition Appeal Tribunal (CAT), means there will now be collective redress system for competition claims. It also means individual consumers and small and medium-sized enterprises (SMEs) will not have to undertake significant financial risks to embark on expensive litigation.

SMEs who wish to bring a case will also be considered for a fast-track procedure, which means trials will take six months at the most, making it both quicker and easier to seek redress.

The CAT, which until now could only hear claims that followed on from infringement decisions by competition regulators, will now be able to hear stand-alone claims. The new rules also include a procedure for collective settlements and also empower the CAT to grant injunctions to stop anticompetitive behaviour.

There are a number of requirements around the way in which claimants can participate in a class action. At a simple level, both opt-in (a claimant choosing to join the class) and opt-out (a claimant automatically being part of the class unless they take steps to opt out of it) may be brought in the CAT. However, opt-out class actions can be brought by UK claimants only. Foreign claimants must specifically opt-in to the class.

Speaking to Legal Business Addleshaw Goddard competition partner Bruce Kilpatrick said the changes will make low-value, high-volume claims, such as the high-profile football kit price-fixing case, now viable in the UK.

‘It will act as a significant deterrent in practice for companies that are maybe engaged in anti-competitive activity particularly in those consumer-facing markets and also will help to bring an effective redress mechanism for consumers and small businesses for the first time,’ he added.

As expected, the Consumer Rights Act is likely to concern big businesses, due to the risk of increased litigation and those excesses experienced in US antitrust class action litigation.

However Freshfields Bruckhaus Deringer litigation and antitrust partner Mark Sansom maintains that there are safeguards in place for concerned clients.

‘The new regime includes some safeguards to keep things in check.  In particular, the CAT has to authorise each and every claim and that is intended to weed out spurious claims or ones that are duplicative.  Also we don’t have US-style treble damages – any damages at the end of the process would be compensatory only – we don’t have jury trials and we have the “loser-pays” costs rule, all of which should disincentivise bad claims.’

One area that will benefit from the arrival of class actions for damages for competition infringements will be third party litigation funding, which will be used to underwrite many claims. This legislation could have a significant impact on the litigation landscape in this country, if these competition class actions are deemed a success.

Rosie Ioannou, senior counsel at funder Vannin Capital, said: ‘What is clear, given experiences in other jurisdictions where class actions now operate, is that funding will be key to their success. It remains to be seen exactly how funding of class actions in the UK will work in practice: different approaches have been taken in other jurisdictions where class actions are currently permitted. We consider that the CAT’s approach to certification of claims, including the funding element of such claims, will be key.’