New "opt-out" class action to be introduced for competition claims

The government has today published its plans for reforming the UK regime for competition law private actions, including the creation of a new "opt-out" collective action for competition law claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT). This proposal has been highly controversial due to concerns that it may lead to some of the "excesses" of US-style antitrust litigation (see our post on the government's consultation last April). 

Under an opt-out regime claims can be brought on behalf of a defined group and damages awarded to that group, without the need to identify individual group members; all those who fall within the group will be bound by the result (including a settlement) unless they actively opt out of the case. This is a significant departure from existing procedures for pursuing multi-party litigation in this jurisdiction. Under the government's proposals, the CAT will be required to certify whether an action should proceed on an opt-in or opt-out basis. The opt-out aspect will apply only to UK-domiciled claimants; those domiciled outside the UK will need to opt in if they wish to participate in the litigation.

One aspect of the government's plans that is likely to be particularly unpopular with defendants is that any damages remaining unclaimed will be paid to the Access to Justice Foundation rather than reverting to the defendant. Accordingly, the damages that defendants will have to pay will be based on losses suffered by the entire class, not only those who come forward to claim their damages. Parties will however be free to agree a settlement on a different basis, subject to approval from the CAT.

The government is also proposing a new opt-out collective settlement regime for competition cases, whereby parties could ask the CAT to approve an agreed settlement on an opt-out basis (for UK-domiciled claimants) without the need for a claim to be brought. This is similar to the Dutch mass settlements regime, save that the Dutch system purports to cover claimants domiciled outside the Netherlands (including potentially UK-based claimants). There will also be new powers for the Office of Fair Trading (OFT), and in due course its successor the Competition and Markets Authority (CMA), to certify voluntary redress schemes.

The government's announcement follows an update on the proposals given by Jo Swinson MP (Minister for Employment & Consumer Affairs, responsible for the reforms) at a breakfast seminar hosted by the CBI and Herbert Smith Freehills on 24 January, "Class actions in competition cases coming to the UK?", at which the proposals were debated by the Minister and a panel of speakers from the CBI, Which? and Herbert Smith Freehills.

It is clear that the government's reforms will lead to a significant rise in private competition law litigation in the UK. Click here for more detail on the reforms from our competition disputes group.