A second chance for class actions

The original mobility scooters case may not have attracted much attention at the time, other than perhaps for competition lawyers. But the decision in 2014 by the Office of Fair Trading (OFT) – whose functions have now been assumed by the Competition and Markets Authority (CMA) – has resulted in a test case for the UK’s new ‘class action’ regime introduced for competition claims under the Consumer Rights Act in 2015.

The OFT’s decision found that a manufacturer of mobility scooters, Pride Mobility Products Limited (Pride), and eight of its retailers had infringed competition law by agreeing to restrictions preventing the retailers from advertising discounts online from Pride’s recommended retail price (RRP). No fines were imposed as companies with turnover below a certain threshold are immune from fines for competition law breaches. However, they are not immune from claims for damages arising from their conduct.

Under the new class action (more accurately collective proceedings) rules, a representative may bring a collective action on behalf of consumers or businesses that may have suffered loss, either on an opt-in or opt-out basis. This ensures that claimants whose individual loss is not material (and would not otherwise bring a claim) can seek redress if the infringement is proven to have caused loss.

One important feature of the regime is that the proposed action must be certified by the Competition Appeal Tribunal (CAT) before it can proceed. Certification will depend on a number of issues, including, importantly, whether the claims concerned raise the same, similar, or related issues of fact or law. Other factors relevant to certification include whether the CAT considers that it is just and reasonable for the proposed representative to act on behalf of the proposed class (taking into account whether the class representative has a conflict of interest with any class member and can act fairly and adequately on their behalf).

First class action

In May 2016, an application was made by Dorothy Gibson, the general secretary of the National Pensioners Convention, seeking permission to bring a collective action following the OFT’s decision. This was the first such attempted class action (and there is only one other case currently awaiting certification, which relates to Mastercard’s interchange fees in which the class representative estimates damages at £14bn).

Although each case needs to be assessed on its merits and particular set of facts, the potential difficulties in obtaining certification are highlighted by the fact that almost a year after the application was made no decision on certification has yet been made by the CAT.

In the Pride case, the CAT raised concerns about the way in which the proposed claim has been formulated and the approach to assessing damages and stated that it would adopt a ‘rigorous’ approach to certification issues.

In essence, the CAT found that the proposed claim covered alleged damage from Pride’s online RRP policy and was not limited to alleged losses from the infringement found in the OFT’s decision, which only covered arrangements with eight retailers (out of over 200 retailers with which it dealt). The CAT therefore adjourned the proceedings in order to allow Ms Gibson’s lawyers to reformulate her arguments.

Vulnerable consumers

In particular, it appears that a factor in the CAT’s decision was the fact that those affected were vulnerable consumers, who may have paid more for mobility scooters than would have been the case absent Pride’s anti-competitive conduct.

The CAT therefore decided it was appropriate to give Ms Gibson the opportunity to amend the claim form and propose revised sub-classes of affected customers and a revised damages methodology ‘which focuses on the effects of the agreements that were the subject of the [OFT] Decision’. Although the CAT has effectively given Ms Gibson a second chance it noted that, even once the claim form and methodology are amended, the certification request may still face considerable difficulties.

The ruling suggests that, while the tools are now in place to bring collective proceedings in competition cases, the CAT will carefully examine any requests for certification to bring such actions. In particular, the lesson to be learned from the CAT’s recent judgment is that the proposed class should be clearly identifiable as comprising prospective claimants that may have suffered as a result of the conduct described in an OFT or CMA decision which is the basis of the action.

Marc Israel is a partner at White & Case

@WhiteCase www.whitecase.com