Type: Client Alerts
On 25 May 2016, the National Pensioners Convention (NPC) issued formal proceedings at the Competition Appeals Tribunal (CAT) in London against Pride Mobility Products (Pride) on the grounds of anticompetitive conduct. This is the first collective action of its kind brought in the UK after the law was recently updated in October 2015. It follows failed attempts by the parties to reach a costs settlement.
Current Case Pride is a U.S. manufacturer of mobility scooters for the elderly, based in Exeter, Pennsylvania. The NPC is an organisation that represents pensioners across the UK. Dorothy Gibson, the NPC’s general secretary, aims to represent the claimant class.
On 27 March 2014, the Competition and Markets Authority (CMA) came to the decision that Pride had prevented its retailers from advertising products online and in store below the recommended retail price. Consumers could stand to recover up to £200 per individual, or £7.7m (including interest) collectively across up to 34,000 claimants,1 should the action succeed at court.
Applicable law The Competition Act 1998 (CA 1998) was amended by the Enterprise Act 2002 to incorporate section 47B, which saw the introduction of a collective action regime for competition cases in the UK. This had limited success, however, as claims could only be filed on an ‘opt-in’ basis (meaning that claimants had to proactively opt-in to the action), and claimants could only be represented by the specified statutory consumer representative.
This mechanism was shown to be ineffective as only one collective action was brought (Consumers Association v JJB Sports)2, and due to the opt-in process, only 130 claimants came forward in this action, out of an affected class of over 130,000.
The Consumer Rights Act 2015 came into force on 1 October 2015. Schedule 8 to this Act modifies section 47B CA 1998 to additionally incorporate an ‘opt-out’ system for collective actions, and widen the scope of the CAT’s power to the extent that it can now hear standalone claims, not only follow-on claims for damages. The ‘CAT Rules’, also now in force, expand upon Schedule 8, and set out in detail how collective actions may be brought.
Now that UK class representatives can select between opt-in, opt-out or a hybrid approach, more claims may be encouraged; but to safeguard against vexatious litigation and avoid the stigma placed upon U.S.-style class actions, measures have been put into place:
- Class members from other European countries can only participate if they specifically opt in
- The class representative must be deemed appropriate, including being able to demonstrate ability to pay the defendant’s costs
- Contingent damages-based agreements are prohibited
Commencing proceedings The CAT has the power to determine whether the action may be brought, having regard to all circumstances and matters it thinks fit. In order to proceed, the collective action must be brought on behalf of an identifiable class; common issues must be raised; and the issue must be suitable to be brought as a collective action. It would be the responsibility of the class representative to manage and organise a unified claim.
In order to act as a class representative, it must be shown that it is ‘just and reasonable’ for them to act on behalf of the relevant proposed class; that the class representative is either a class member, or part of an appropriate pre-existing organisation; that it can meet the defendant’s recoverable costs if ordered to do so; and that the class representative is able to suitably manage the class.
It may be difficult in the case of those who do not have third-party financing or are not themselves institutional entities to become class representatives.
In the Pride case, the first point for the CAT to decide after setting the first hearing date is whether Dorothy Gibson would be a suitable class representative.
Costs The biggest change brought about by this new legislation is the fact that one party – the class representative – will be liable to pay the costs of the defendant if the class action fails at court, as well as its own costs, as the adverse costs rule still applies (under English law, the standard rule as to costs in litigation is that they ‘follow the event’, namely the losing party pays the winning party’s costs). This may act as a significant barrier to individuals who may be best placed to represent the class, but who are not able or willing to bear this cost risk.
One of the biggest deterrents to litigation in England is the potential exposure to the other party’s costs. Competition cases are potentially difficult to prove on the merits, and as seen in Arkin v Borchard Lines3, if significant competition litigation results in failure of the claim, a professional funder may be liable for a substantial amount. The ‘Arkin cap’ was the product of this case; whereby if a professional funder finances a proportion of the losing litigant’s costs, they should be liable for the costs of the other side to the same extent. In Arkin, the total payable by the professional funder on this basis was £1.3 million.
Alternative approach The Civil Procedure Rules provide for the alternative method of bringing such a claim; by way of a Group Litigation Order (GLO). GLOs are useful where there are several big claims that can be brought together simultaneously. This can take place in instances where there are ‘common or related issues of fact or law’.
This procedure should have been tried in the Emerald Supplies v British Airways4 case, but instead they applied for a class action and failed. A GLO was used, however, in Prentice v Daimler Chrysler5, which remains the first and sole example of the use of a GLO in a competition case since their introduction in 20006. Most recently, a GLO was used in a product liability claim7.
Conclusion As this is the first case under the new legislation, much may be learned from it. If this case proceeds to a conclusion in front of the courts, it may promote further similar actions, and encourage other classes to bring competition actions against cartels or dominant players. It is yet to be determined whether the new UK legislation is capable of bringing about a more open contentious landscape for consumers, but one which does not give rise to a U.S.-style litigation culture in the UK.
- Leigh Day website: accessed 15/06/2016: https://www.leighday.co.uk/Asserting-your-rights/Competition-law-class-actions/Pride-mobility.
- Consumers Association v JJB Sports plc, Case No. 1078/7/9/07.
- Arkin v Borchard Lines Ltd and others  EWCA Civ 655.
- Emerald Supplies Ltd & Another v British Airways Plc  EWHC 741 (Ch), (paragraph 38).
- Prentice v DaimlerChrysler UK – this case resulted in settlement before trial.
- So far, only 94 GLOs have been granted by the courts: please see the following link for a list https://www.gov.uk/guidance/group-litigation-orders#corin-metal-on-metal-hip.
- Corin supplied a metal-on-metal hip replacement which the claimants wish to argue was defective on date of supply.
- GLO granted 22 October 2015.
Client Alert 2016-165