The UK Consumer Rights Bill and private enforcement of competition law

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

In January 2014 the UK Government introduced the Consumer Rights Bill to Parliament, which contains proposals to overhaul the private enforcement of competition law in the UK. When it enters into force, the Bill will implement the following key amendments to the UK's current private enforcement regime:

• Increased jurisdiction of the Competition Appeal Tribunal ("CAT") with respect to damages actions for infringements of competition law;
• Introduction of opt-out collective actions before the CAT; and
• Establishment of voluntary redress schemes, to be managed by the Competition and Markets Authorities ("CMA").

Below we set out details of these amendments. It should, however, be noted that the Bill is currently making its way through the legislative process and therefore may be subject to amendments before it finally gains Royal Assent and enters the statute books. The law is expected to enter into force on 1 October 2015.

Increased jurisdiction of the CAT

The proposals set out in the Consumer Rights Bill amend the Competition Act 1998 to expand the jurisdiction of the CAT. In doing so, the changes will bring the powers of the CAT broadly in line with the powers of the High Court with respect to damages actions for infringements of competition law. The key changes include:

• Permitting the CAT to hear stand-alone damages actions (cases in which a competition authority has not issued an infringement decision, and the claimant must therefore prove both that there has been a breach of competition law and that it has suffered loss as a result of the breach);
• Increasing the limitation period for bringing an action for damages in the CAT from 2 to 6 years; and
• Empowering the CAT to grant injunctions.

The Consumer Rights Bill also contains amendments to the Enterprise Act 2002 relating to the CAT's procedures, which will allow the CAT to give effect to the expansion of its powers. This includes the power to amend the CAT Rules to create a fast-track procedure for suitable follow-on damages claims (but not collective actions). The CAT has discretion to determine the factors for selecting cases suitable for fast-track, but it is thought that the procedure will be used for straightforward damages claims brought by small and medium sized enterprises.

Opt-out collective actions

Under the current system of private enforcement of competition law in the UK, only opt-in collective actions are permitted. The Consumer Rights Bill, however, introduces opt-out collective actions. The opt-in and opt-out collective action can be distinguished as follows:

• Claimants to an opt-in collective action only join collective proceedings when they actively assert membership to a class.
• Claimants to an opt-out collective action will automatically fall within a 'class' for the purposes of the proceedings unless they take the necessary prescribed steps to opt-out.

Under the newly proposed system, once a collective action has been filed with the CAT, the claim may only continue if the CAT makes a collective proceedings order ("CPO"). The CAT will only make a CPO if it considers firstly that it is able to authorise the person who brought the claim to act as representative in the collective proceedings and secondly, that the claims raise the same, similar or related issues of fact and law. The CPO itself must:

• Authorise a representative;
• Describe the class of persons eligible for inclusion in the proceedings; and
• Specify whether the proceedings are opt-in or opt-out.

The Bill also sets out the rules governing the award of damages and costs in collective proceedings and makes provisions for the settlements of such actions. Under the new regime, the CAT will be able to approve settlements of collective actions where it considers the terms of a proposed settlement are just and reasonable. Once approved, a settlement will be binding on all people in the class defined by the CPO or by a settlement order, which will be issued by the CAT in instances where a settlement is reached before a CPO is issued.

Voluntary redress schemes

The Consumer Rights Bill introduces voluntary redress schemes addressed at companies which have been found to have infringed either UK or EU competition law. Infringing companies will be able to apply to the CMA to approve a redress scheme, pursuant to which the applicant will voluntarily agree to pay compensation to victims of the infringement. The CMA may not approve a scheme until the relevant competition authority has taken a final infringement decision. Once approved, the redress scheme becomes binding on the applicant and gives an enforceable right to both those entitled to compensation and to the CMA where it is considered that the applicant is in breach of its duty to comply with the approved scheme. The CMA is required by the Bill to publish guidance on the procedures relating to the implementation and enforcement of redress schemes.

Conclusion

The proposed changes set out in the Consumer Rights Bill widen the remit in the UK for bringing an action for damages for an infringement of competition law before the CAT. In addition, the proposals greatly empower the CAT, which will in future be better prepared to deal with the complexities of competition-related damages cases, thereby easing the path to compensation for claimants. Consequently, companies found to have infringed competition law will find themselves at risk of substantially increased liability as a consequence of their breach.

Once the Consumer Rights Bill gains Royal Assent and the exact scope of the amendments to the private enforcement regime of competition law in the UK becomes set in statute, Olswang will publish another, more detailed update to the changes to the law and the expected consequences for businesses.