First rejection of a UK competition class action due to unsuitability of class representative

On 14 January 2025 the UK Competition Appeal Tribunal (CAT) refused to certify a standalone opt-out competition class action against Apple and Amazon to proceed to trial, on the basis that the proposed class representative (PCR) – Professor Christine Riefa – was not suitable to represent the class of approximately 36 million claimants.

Coming hot on the heels of the recent Le Patourel v BT judgment (see our previous briefing), this is another very significant judgment for the development of the UK competition class actions regime:

• It is the first time since the Supreme Court's judgment in Merricks v Mastercard lowered the threshold for certification that the CAT has rejected certification of a competition class action outright, with no option for the PCR to amend the claim and reapply.
• It is the first time that the CAT has refused certification on the grounds that it was not just and reasonable for the PCR to act as a representative in the proceedings (the so-called "authorisation condition"). This meant that the CAT did not rule on the eligibility of the claim to proceed as an opt-out class action.
• The certification hearing featured the first-ever cross-examination of a PCR, with Professor Riefa questioned in detail about her understanding of the funding arrangements and the potential conflicts of interest that could arise between the funder, the claimant law firm and the class members.
• The CAT criticised the use of broad confidentiality obligations in funding agreements that can only be waived at the unilateral discretion of the funder. It considered that it is "crucial" in opt-out proceedings for sufficient information about funding arrangements to be made available to the class members to enable each of them to make an informed decision about whether to opt out. We expect this to have direct implications on the approach funders take going forward.

In terms of implications for future cases, it remains to be seen whether refusal of certification on the basis of unsuitability of the class representative will become more common. The CAT emphasised that its decision in this case was based on the cumulative effect of a series of concerns, and that it is only in "extreme" cases that concerns regarding the funding arrangements may lead to a certification being refused. However, we expect to see more focus on the PCR's understanding of the funding arrangements at the certification stage, and greater use of cross-examination, in the context of determining whether it is just and reasonable to authorise the PCR to act on behalf of the class.

For those considering taking on the role of a PCR in a future competition class action, the CAT's judgment makes for sobering reading: the CAT stresses that PCRs must take their responsibilities very seriously and make sure they understand any funding arrangements in sufficient detail to ensure that the interests of the class are being reasonably served and protected (noting that the lawyers instructed to act for the PCR may have a conflict of interest when advising on the terms of the funding arrangements).

We consider the key aspects of the judgment in more detail below.

Background

The claim originated in an approach from an economist to a law firm, who in turn instructed finance brokers and signed heads of terms with a litigation funder. Professor Riefa, a law professor at the University of Reading, was subsequently approached to act as the PCR (acting through a company set up for the purposes of the litigation). Damages of just under £500m were sought on behalf of up to 36 million purchasers of Apple products, who it was alleged had been overcharged as a result of alleged anti-competitive agreements between Apple and Amazon that reduced the number of resellers of Apple products on Amazon UK Marketplace.

Initially, there were no objections to Professor Riefa's suitability. However, during the certification hearing held in July 2024 concerns were raised by the CAT that statements made by Professor Riefa in a witness statement indicated that she did not correctly understand the funding arrangements for the claim. In particular, she appeared to believe that if the claim was successful then the funder and the claimant solicitors would only be paid out of unclaimed damages, whereas the funding agreement in fact placed her under an unqualified obligation to request that the CAT make an order permitting payments from any damages award to be made to the funder and claimant solicitors ahead of the class members.

This led the CAT (and the defendants) to raise concerns about Professor Riefa's suitability to act as the class representative. The CAT ordered a subsequent hearing in September 2024 to consider further evidence on this point, together with a number of other issues relating to the confidentiality and substance of the funding terms agreed. The CAT also encouraged the defendants to consider whether to apply for permission to cross-examine Professor Riefa.

PCRs will be held to a high standard when assessing suitability

It has become common for a PCR to be identified at a relatively late stage, after the case theory has already been developed by the law firm in question and the terms of funding have been agreed in principle. The CAT did not object to this process as such, noting that competition class actions almost inevitably require third party funding to proceed.

However, the CAT emphasised that a PCR "cannot be merely a figurehead for a set of proceedings conducted by their legal representatives". The role of the PCR comes with a "heavy responsibility" to ensure proceedings are conducted in the best interests of the class, and the PCR must act as an independent advocate and engage robustly with advice received. When deciding whether it is just and reasonable to authorise the PCR to act on behalf of the class, the CAT will consider the steps taken by the PCR to satisfy itself that the funding arrangements (and any subsequent amendments to those arrangements) reasonably serve and protect the interests of the potential class members.

In this particular case, the CAT concluded that Professor Riefa was not sufficiently independent and robust and had relied too heavily on her legal advisors (who will usually also benefit from the funding arrangements), without fully considering the potential conflicts of interest in play.

PCRs should be prepared for cross-examination

Professor Riefa was cross-examined in detail about her understanding of the funding arrangements she had entered into and the potential conflicts of interest that could arise between the funder, the claimant law firm and the class members. The CAT found her to be "hesitant" and "uncertain" in her answers, demonstrating insufficient understanding of the funding arrangements when questioned about the discrepancies in her witness statements.

In particular, Professor Riefa could not explain the circumstances in which it might be in the best interests of the class for the funder to be paid in priority to the class, despite having agreed to an amendment to the funding agreement that provided that she would apply to the CAT for an order to that effect "where it is appropriate in all the circumstances."

Looking to future cases, PCRs may face cross-examination more frequently at the certification stage, given the successful outcome for the defendants in this case, and should be prepared to face in-depth questioning on their understanding of any funding agreement (especially clauses that set out the priority of payments between the funder, advisors and the class members).

Funding arrangements will continue to be scrutinised at the certification stage

The judgment confirms that the CAT will be cautious about venturing into an assessment of the commercial terms of a litigation funding agreement or intervening in relation to the funder's return at the certification stage (given its ability to control the level of any return to the funder when an opt-out claim reaches the stage of final judgment or settlement).

However, the CAT will scrutinise the funding arrangements to satisfy itself of the PCR's ability to pay the defendant's recoverable costs and fund its own costs as well as the need for the funding arrangements to reasonably serve and protect the interests of the class. In doing so, it will call-out "extreme" terms, which could lead to a refusal to certify the claim.

In this particular case, the funding agreement was amended numerous times, including to take account of the Supreme Court judgment in PACCAR (see our earlier briefing). By the September 2024 certification hearing, in addition to the provisions relating to the possibility of the funder being paid in priority to the claimants, the funding agreement included a success fee made up of the drawn funds plus a maximum multiplier of 5.75. However, the CAT concluded that the funding terms were not, "in themselves, sufficiently extreme to warrant calling out", noting that there has been at least one previous case in which certification has been granted where the funding agreement included similar payment priority provisions (Gutmann v Apple – the CAT's judgment on the validity of such a clause is on appeal to the Court of Appeal).

Terms of funding agreements should be open to scrutiny by class members

All versions of the funding agreement in this case included wide confidentiality obligations that prevented the PCR from disclosing the terms to potential class members, including the funder's level of return (unless waived at the unilateral discretion of the funder).

The CAT was very critical of this approach. It considered that the terms of funding agreements should be open to scrutiny not only by the court but also by members of the class on whose behalf the claims are brought. In opt-out proceedings, it considered this to be “crucial” to enable each member of the class to make an informed decision about whether to opt out.

The CAT considered that the fact that Professor Riefa had not challenged the funder on this point (appearing to have simply accepted that the funder felt strongly about confidentiality) raised concerns that she might not always have been acting with the interests of the class members at the forefront of her mind.

Use of a consultative or advisory panel to provide additional advice to the PCR

In a number of ongoing competition collective proceedings, a consultative or advisory panel has been set up to provide additional advice to the PCR. The CAT confirms in its judgment that the use of such a panel is not mandatory. However, it suggests that it may be useful where the PCR has limited experience and/or limited access to appropriate support in fulfilling their role as class representative in this kind of complex litigation.

Moving forward, we may see greater use of such panels, particularly where – as seems to be increasingly the case – academics are selected to act as PCRs for very high-profile and high-value litigation. However, the CAT emphasised that full details of any such panel must be put before the CAT prior to the certification hearing and it is not sufficient for a PCR to say they will put one in place if the claim is certified.