31 May 2019

Competition law exists to protect the interests of consumers. Cartels and other infringements of competition law may lead to the infringers’ direct customers, downstream purchasers, and ultimately end consumers, paying higher prices. Individuals and businesses who claim to have suffered loss as a result of breaches of EU competition law can bring actions for damages in national courts. The practical reality, however, is that individual consumers are unlikely to be able to bring their own claims, especially where the amount suffered by each of them is small, even where the aggregate loss suffered by consumers collectively is substantial. An effective system for enabling consumer redress therefore requires the national courts develop effective mechanisms for collective actions to be pursued on behalf of consumers.

In 2015, the UK Parliament amended the UK’s principal competition law statute, the Competition Act 1998, to introduce a new procedure for collective actions for damages for competition law infringements. Such collective actions could, for the first time in England and Wales, be brought by a “class representative” on an “opt-out” basis, i.e. on behalf of a class of persons the members of which need not have taken any active steps to bring their claims. Collective actions can therefore be brought seeking damages for “passive claimants”, i.e. people who may know nothing about the competition law infringement or the collective action. Previously, collective actions could be brought only on an “opt‑in” basis, meaning that the class members had to be persons who had actively chosen to have their claims pursued as part of the action – a requirement that seriously limited the potential for consumers’ losses to be recovered.

Although opt-out actions can seek damages on behalf of “passive claimants” only where those persons are resident in the UK, such an action can also include claims for residents of other countries who have chosen to “opt in”. It is therefore possible for a class representative to bring a collective action in the UK for damages caused by an EEA‑wide cartel, claiming damages both: (a) for everyone in the UK who has suffered loss (whether or not they have actively chosen to have their claims included in the action); and (b) people elsewhere in the EEA who have agreed for their claims to be included.

The new procedure introduced by the 2015 amendments was a much-heralded innovation, but had a bumpy start. The first two applications for permission to bring opt‑out collective actions under the new procedure failed at the first hurdle, namely the “certification stage”. That is the stage at which the prospective “class representative” seeks from the UK’s Competition Appeal Tribunal (“the Tribunal”) a “Collective Proceedings Order” (“CPO”) permitting the collective action to go forward.

The second of those rejected applications was made by a Mr Merricks. He wished to be authorised to, acting as class representative, bring a claim on behalf of all consumers in the UK who had suffered loss as a result of a competition law infringement by Mastercard in relation to the level of “multilateral interchange fees”. He wished, in particular, to argue that the higher fees had raised the prices paid by all UK consumers to nearly all retailers over many years. His proposed action would therefore have comprised claims on behalf of the vast majority of the UK population.

Mr Merrick appealed against the Tribunal’s refusal to grant a CPO at the certification stage. On 16 April 2019, the Court of Appeal in Merricks v Mastercard [2019] EWCA Civ 674 allowed Mr Merrick’s appeal from the Tribunal’s decision. The Tribunal’s original order refusing the CPO is, accordingly, set aside and the application for certification is remitted to the Tribunal for re-hearing.

The Court of Appeal’s judgment is of significant importance for the attractiveness of the UK as a forum for bringing actions for competition law damages, and has obvious consequences for potential defendants to such actions. The judgment significantly re-calibrates the nature of the certification stage by significantly lowering both the thresholds of what the applicant must demonstrate and the level of inquisition at the CPO hearing.

The Court lowered the evidential and legal thresholds

The Court of Appeal held that the appropriate test for satisfying the commonality requirement should be the same “some basis in fact” test that applies in the Canadian courts at the certification stage for class actions. This test requires the class representative to show that the collective action has a “real prospect of success”, but does not require that the court resolve conflicting facts and evidence at the certification stage.

The nature of examination of the prospect of the action succeeding is less intensive

The Court of Appeal emphasised that the certification stage should not be, in effect, a “mini-trial”. With regard to the availability of information for demonstrating that the competition infringement had caused the class members to suffer losses it was not appropriate at the certification stage to require the experts instructed by the class representative to specify in detail what data would be available for each relevant aspect of the infringement. Instead, it was enough that expected sources of data were noted. 

Individual loss is not required

The Court of Appeal considered the Tribunal to have erred by requiring the class representative to demonstrate that it was likely to be possible to quantify the class members’ losses, caused by the infringement, at the level of individual class members, rather than simply on a total basis across the class as a whole. The Tribunal’s view had been that a collective action should not be certified unless there would be a reasonable method available for identifying the loss suffered by each individual class member. Such a method should enable any aggregate damages award payable by the defendant to be distributed amongst class members in a way that bore some reasonable relationship to the loss suffered by the individual member. The Court of Appeal held, however, that “…there is no requirement to approach the assessment of an aggregate award through the medium of a calculation of individual loss…”.

Further, the Court of Appeal held that aggregate damages do not have to be capable of being distributed to individual class members in a way that bears some relationship to each class member’s own loss. The methodology to be used for distributing aggregate damages (i.e. an amount that the respondents might be required to pay to compensate for the losses of the class members in aggregate) is a matter for the Tribunal to consider only after it has made an aggregate award. Indeed, questions as to how any award should be distributed was simply not a legitimate matter of concern for the defendant.

Thus, according to the Court of Appeal, questions as to whether and how individual class members’ own losses could be quantified were not relevant for deciding whether or not a collective action should be certified. Rather, the question of whether the class representative had “some basis in fact” was in relation to whether there was a real prospect of proving aggregate loss of the class as a whole.

The difference of view between the Tribunal and the Court of Appeal reveals a fundamental difference between them as to what a collective action is. The Tribunal had, in line with the views it had expressed in its previous judgment in a case called Gibson v Pride Mobility Products, regarded a collective action under the new procedure as essentially just a bundle of the class members’ individual claims, each of which could have been brought individually. On that basis, the introduction of the new procedure was not a radical development, and certainly did not amount to any modification of the substantive law in terms of the requirements for a relevant cause of action (which, in English law, is a claim for damages for the tort of “breach of statutory duty”). On such an analysis, it would logically follow that each person in the class must be shown to have at least suffered some loss, which was capable of quantification at least on a “broad axe” basis – these are things that any such person would have had to show in order to succeed in a claim he or she had brought individually for damages for “breach of statutory duty”.

The Court of Appeal’s approach, in contrast, effectively dispenses with the requirement for each, or even any, of the individual claims comprised within a collective action to be proved. Instead, the requirement for loss to be shown is effectively replaced with a requirement that some (not necessarily identified or identifiable) members of the class suffered loss.

The Court of Appeal’s judgment provides some powerful policy justifications as to why such an approach is a just one. In particular, if consumers collectively have suffered an aggregate loss which can be proved, why should difficulties in showing loss at the level of individual consumers produce a result whereby a company that caused the aggregate loss is able to escape paying any damages? It seems more just for the aggregate damages to be paid, and to then be distributed, on a pragmatic basis, amongst consumers who are likely to have been affected to some extent.

It is, however, questionable whether these policy justifications justify effectively a re-characterisation of the necessary ingredients of a tort, without clearer evidence that this was the UK Parliament’s intent – especially given that this change, which is arguably one of substantive law rather than procedure, is to be applied with retrospective effect (to losses caused prior to the new collective actions procedure being introduced by the amendments made to the Competition Act in 2015).


 The Court of Appeal has significantly re-calibrated the threshold which applicants have to meet in their favour. It remains to be seen how the Tribunal will now apply this lower standard in Merricks (to which the Court of Appeal remitted the CPO application for re‑hearing), and also when dealing with the applications for CPOs for both “opt out” and “opt in” collective actions for damages on behalf of purchasers of trucks (the EU Commission having found that there was a cartel between truck manufacturers).

This positive (from the point of view of claimants) development in the procedure of the UK courts should be seen alongside other indications of the UK Tribunal’s approach to disclosure. In separate proceedings relating to the trucks cartel earlier this month, the Tribunal ordered truck manufacturers to disclose minutes from trade group meetings going back to 1992, even though the EU Commission decision found that the cartel started in 1997. Such disclosure may enable the claimants to make an argument that anti-competitive co‑ordination was also occurring before 1997 – an argument that could substantially increase the value of the damages claims.

Written by guest contributors to the Antitrust Alliance, Alan Bates and Jack Williams, barristers practising from Monckton Chambers in London.