What are private actions and how do they work?
Private antitrust actions refer to claims brought by companies or individuals that have suffered a loss due the infringement of the Chapter I or Chapter II prohibitions1 by another company or individual. Private competition enforcement covers three types of claims:
- ‘Follow-on’ actions: these follow the decision of a regulator after a breach has been established and must be based upon the same infringements already determined by the regulator.
- ‘Stand-alone’ actions: in 2015, the Consumer Rights Acts broadened the scope of the Competition and Appeals Tribunal (CAT) to hear these claims. This is where a claimant may attempt to obtain damages or an injunction in relation to an alleged infringement. This could be completely independent of any public enforcement or may operate in parallel or alongside an anticipated or ongoing investigation.
- ‘Collective’ proceedings: often called ‘class actions’, these arise when a class representative brings a claim on behalf of a number of claimants, who may each choose whether or not to opt in. These claims may be either on a follow-on or stand-alone basis, and require the permission of the CAT to be heard.
Private competition actions are most commonly brought before the High Court or the CAT in the first instance. Follow-on and stand-alone actions may be heard before either the High Court or the CAT, but collective proceedings may only be heard before the CAT (once permission has been granted). Considerations such as the procedure, the complexity of the case and limitation periods are important when deciding where to bring a claim. For example, the CAT offers a ‘fast-track’ process and generally a more informal and commercial approach as the matter tends to be heard by a panel comprising a lawyer and two other members, each with expertise in the relevant industry, as opposed to a single judge in the High Court.
Public vs. private enforcement
Public actions are often carried out by the Competition & Markets Authority (CMA), the principal competition regulator and enforcer in the UK. The powers provided to the CMA under the Enterprise Act 2002 enable it to open investigations into potential breaches of competition law and independently decide whether anticompetitive behaviour has occurred and fine the offending company up to 10% of its global turnover. The CMA estimates that its enforcement of compliance with competition law saved consumers at least £397 million during the financial years 2020/21 to 2022/23, representing annual average consumer savings of £132.3 million.2 CMA investigations can last for years until a conclusion is reached. In light of the CMA’s active enforcement work to protect consumers from anti-competitive behaviour and its investment of time and other resources, are private competition law actions worth it?
Advantages of private actions
There is a public interest in private enforcement of competition law3 and as private actions can be a further deterrent to anticompetitive behaviour, this method of challenging infringements is encouraged. There is support from competition regulators for private claimants to bring their own actions, and this has led to a number of reforms in legislative policy to improve the procedure and potential beneficial outcomes for claimants. Early reforms with this purpose can be noted with the Consumer Rights Act 2015 and then the EU Damages Directive, which was formally implemented in the UK in 2017. More recently, the Department for Business, Energy & Industrial Strategy (BEIS) announced it intends to extend the CAT’s jurisdiction to grant declaratory relief. This would allow claimants to seek a declaration extending claimants’ options for relief beyond only damages and injunctions. Confirmation that private competition enforcement could result in damages was first provided by the court ruling in Arkin v. Borchard Lines [2003] EWHC 687, and this principle has been further developed since. For example, proposals suggest that exemplary damages could be awarded for actions which are not collective proceedings. Further, in 2022 the CAT was given the power to issue umbrella proceedings orders in situations where numerous actions raise similar competition concerns, allowing for more cost-effective and timely processing of claims.
Previous private actions have shown the potential for large sums to be awarded by way of damages. In 2023, Royal Mail and BT were awarded millions of pounds in a follow-on claim from the European Commission that found that van suppliers had been engaging in a cartel for a number of years.
Costs of private enforcement
Unlike competition litigation in the U.S., claimants in the UK bear the burden of costs should they be unsuccessful. The successful party to a claim, whether that be the defendant or claimant, can generally recover legal, court and experts’ fees from the other side, as well as other expenses incurred in relation to the claim. The High Court tends to uphold this rule, and the CAT may do so at its discretion, as provided for in Rule 104(2) of the Competition Appeal Tribunal Rules 2015, which states: “The Tribunal may at its discretion, subject to rules 48 and 49, at any stage of the proceedings make any order it thinks fit in relation to the payment of costs in respect of the whole or part of the proceedings.” Nevertheless, the burden of costs on the unsuccessful party should be, and usually is, a major consideration for a claimant when deciding whether to bring or continue a UK antitrust claim. For example, the UK’s first opt-out class action, led by Dorothy Gibson against a mobility scooter manufacturer, was withdrawn in 2017 due to uncertainty surrounding the costs of proceeding, with the claim outweighing any potential damages that may have been awarded.
The Arkin case, mentioned above, has also proved significant in shaping cost procedures for third party funders of competition claims. The Arkin cap was a favourable concept for commercial litigation funders as it states that funders of an unsuccessful claimant will only be liable up to the amount they had provided to the claimant. However, in 2020, the case Chapelgate Credit Opportunity Master Fund Ltd v. Money and others [202] EWCA Civ 246 stripped funders of this comfort as the Court of Appeal confirmed that the Arkin cap is not automatically applicable to all cases of commercial funding and the court retains discretion in ordering costs exceeding the amount already funded depending on the circumstances.
Confidentiality in private actions
In private actions, confidential information of the parties and third parties to the proceedings is often produced in accordance with disclosure obligations.4 If you are the party disclosing documents containing confidential information, it is important to notify any third party that is a party to those documents, and make them aware of the option to object to disclosure. If you are a third party, you may object to disclosure of your confidential documents by notifying the CAT or relevant court in writing. If you are party to the proceedings and have concerns that your confidential documents may be disclosed, the mere fact that the documents are confidential is not sufficient to protect them from disclosure. However, when documents are commercially sensitive, this can be resolved by way of a confidentiality ring which gives only specified independent experts and lawyers access to the documents. A confidentiality ring was used in Nokia Corporation v. AU Optronics Corporation [2012] EWHC 731 (Ch) and meant that parts of Nokia’s particulars of claim could not be shared with the in-house counsel of some of the defendants in the proceedings.
What next?
Despite Brexit, the English courts continue to hear cartel decision claims by the European Commission that predate 31 December 2020. We are also seeing a rise in the number of private competition claims in German and Dutch courts. Outside of Europe, there has also been an increase in follow-on actions in Japan following a number of awarded damages and decisions by the Japanese Fair Trade Commission. In addition, an increase in abuse of dominance investigations has led to a rise in injunction applications by competitors and affected third parties. The landscape of private actions is therefore constantly evolving as a result of regulatory and legislative developments, and decisions on ongoing matters being handed down.
- Chapters I and II, Competition Act 1998.
- CMA Impact Assessment 2022 to 2023, 17 July 2023, available at gov.uk.
- Private enforcement of competition law 2023, judges’ roundtable, remarks of Sir Marcus Smith (President, UK Competition Appeal Tribunal), 7 February 2023.
- Disclosure can be sought from non-parties under Civil Procedure Rules 31.17.
Client Alert 2024-091
