Opt-out collective actions for breaches of competition law moved a step closer to reality last week after the Consumer Rights Bill began its passage through Parliament.
The bill has its second reading in the House of Commons today, and opt-out actions are likely to prove controversial, with the CBI claiming that they will introduce US-style class actions to the UK.
However, the Department for Business, Innovation and Skills (BIS) said last week that research by the Office of Fair Trading (OFT) showed that businesses view the current approach to private actions as the least effective aspect of the UK’s competition regime because they are so complex to bring.
The bill puts forward a three-prong approach to tackling the problem. First, it proposes reform of the Competition Appeal Tribunal (CAT), including allowing the CAT to hear stand-alone cases – where the alleged breach of competition law is not already the subject of an infringement decision by the European Commission or OFT – grant injunctions, and introduce a cost-capped fast-track regime aimed at SMEs.
This fast-track regime will have an emphasis on injunctive relief, and there will be a presumption that an SME case will be suitable for the fast-track.
The second element is to promote ADR to ensure that the courts are the option of last resort
This will see the introduction of a new opt-out collective settlement regime in the CAT and a new role for the Competition and Markets Authority (CMA) in certifying voluntary redress schemes.
Under the collective settlement regime, any representative consumer group or trade association, together with a business which has broken competition law, could jointly approach the CAT to agree on a level of damages without having to take a case through the court process. Any settlement would then be binding on eligible consumers, unless they opted-out of the settlement.
Under the certifying redress scheme, the CMA could approve a consumer compensation scheme put forward by a business which had broken competition law. Consumers could then come forward and claim their compensation.
Finally there is the “limited” opt-out collective actions regime to sit alongside the existing opt-in regime. Under the latter, only Which? can take forward a collective action on behalf of a group of consumers.
The provisions in the bill will allow any representative consumer group or trade association to bring an action, and eligible consumers or businesses would automatically be included unless they actively opt out.
Safeguards to prevent the emergence of US-style litigation, BIS said, include certification by the CAT of whether the case should be opt-in or opt-out; no treble damages and no contingency fees.