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Lexis+ AI
Caroline Harbord

Partner, Forsters

Quotation Marks
“The last three months have heralded a period of unprecedented excitement in the sphere of collective competition claims.”

Collective Proceedings Orders: The story so far…

Collective Proceedings Orders: The story so far…


Caroline Harbord and Candice Johnson examine the recent changes to CPOs

The last three months have heralded a period of unprecedented excitement in the sphere of collective competition claims.

In August 2021, the Competition Appeal Tribunal (‘CAT’) certified the first ever Collective Proceedings Order (‘CPO’), permitting Walter Merricks to pursue an ‘opt out’ group claim against Mastercard for established breaches of competition law. Merricks is now authorised as class representative on behalf of 46.2m potential claimants in a claim valued at a whopping £13.8bn.

In the weeks that followed, the CAT certified two further CPOs in multi-million pound claims against both BT and two train operating companies (namely First MTR and Stagecoach). These decisions had been put on hold pending the Merricks judgment (Mastercard v Merricks [2020] UKSC 51), and represent further unique developments of the law.

These long-awaited decisions (considered all the way up to the Supreme Court and back) provide the first glimpses of how the CAT will apply the novel ‘opt out’ group litigation regime in practice, and are welcome judicial guidance in this area. 

With the judgments coming thick and fast, and numerous further CPO applications being listed, this article provides an overview of the ‘opt out’ regime, and a summary of the key practical takeaways arising from each of the recent CPO decisions from the perspective of claimants, lawyers and litigation funders.

With the floodgates having been nudged open, and the CMA generally taking an increasingly interventionist approach, there will no doubt be many more interesting developments to report in short order. Watch this space…

The opt-out regime

The ‘opt-out’ regime was introduced by the Consumer Rights Act 2015, and allows group claims for infringements of competition law to be pursued by a class representative on an ‘opt-out’ basis. As such, anyone who falls within the class criteria is included in the claim unless they specifically opt out.

The ‘opt-out’ regime was introduced because the previous regime, which operated on an ‘opt-in’ basis, was considered to be ineffective at facilitating large consumer claims arising from infringements of competition law.

The previous opt-in regime (which remains in place) requires lawyers to undertake the uncertain and laborious task of building a claimant group of sufficient value to offset the necessary litigation funding premium. This often resulted in claims failing to get off the ground despite having good merits. The ‘opt-out’ regime aims to get around this problem, with the class representative taking the place of the traditional ‘opt-in’ claimant group. It also more closely aligns the English approach with that of other more claimant friendly jurisdictions, such as Canada.

Given the novel nature of the ‘opt-out’ regime (as a matter of English legal principle it is highly unusual for proceedings to include a claimant who has not expressly consented to participate), opt-out cases must be certified by the CAT before they can proceed. It is this certification that is the subject of the recent CPOs granted to the class representatives in the claims against Mastercard, BT and the train operating companies.

In order to grant such certification, the CAT must be satisfied that (i) the person seeking to bring proceedings on behalf of the proposed class (i.e. the class representative) is authorised to do so (the “authorisation condition”); and (ii) the claim is eligible to progress as a collective proceeding (the “eligibility condition”). We examine below how these conditions have now been applied in practice.

Mastercard v Merricks [2020] UKSC 51 

The Merricks claim is a ‘follow-on’ damages claim from the European Commission’s findingcertain fees charged by Mastercard restricted competition between banks and resulted in inflated prices for all UK card holders, irrespective of whether those card holders had a Mastercard or not. It is a ‘follow-on’ damages claim because liability (i.e. the infringement of competition law) has already been established by the European Commission, so the purpose of the claim is to establish and quantify the losses flowing from the breach.

The class representative is Walter Merricks, the former chief ombudsman of the Financial Ombudsmen Service. In its decision to grant the CPO, the CAT determined that the potential class comprises anyone domiciled in the UK who, between 1992 and 2008, was at least 16 years old and purchased goods and/or services from UK businesses that accepted Mastercard cards.

Merricks’ journey to the landmark CPO was by no means quick, easy or cheap. The CAT originally rejected the certification in 2017, but this was successfully appealed to the Court of Appeal and upheld by the Supreme Court. The case was then referred back to the CAT, which granted the certification in August 2021, albeit on a slightly narrower basis than Merricks has originally sought (notably excluding deceased individuals from the class of claimants).

The CAT’s decision to grant the CPO was significant not only because it is the first decision of its kind, but also because it illustrates how robust the CAT expects class representatives to be, both financially and emotionally. To meet the Authorisation Condition (defined above), the CAT must be satisfied that the class representative (i) would fairly and adequately act in the interest of all class members, (ii) does not have a material conflict of interest with the class members, and (iii) will be able to pay the defendant’s legal costs.

Mastercard’s lawyers used the first aspect of this test to arguably launch a public character assassination of Merricks and his career record (notably a complaint made by an individual who disagreed with a decision made by Merricks in his former role as Ombudsman). Going forward, this is something that claimant lawyers will no doubt have at the forefront of their mind in preliminary discussions with potential class representatives, to flush out any potential skeletons in the closet as early as possible.

The tribunal’s analysis of Merricks’ ability to pay an adverse costs order provides equally interesting insights into the judicial approach to the Authorisation Condition, and to litigation funding generally. This analysis revealed that Merricks had a litigation funding budget of £45m and an ATE indemnity of £15m to pay the defendants’ costs if the litigation failed. This is an enormous budget by any standard, and demonstrates what a huge opportunity follow-on claims present for litigation funders.

The CAT undertook a granular analysis of Merricks’ litigation funding agreement, and approved a term which allowed the litigation funder to pull out of the claim on 45 days’ notice and with supporting legal advice if it looked likely that the funder’s return would fall below £179m. The CAT’s analysis in this regard highlights quite how profitable these claims can be for funders. If a funder is permitted by the CAT to walk away from a claim if their expected profit falls below a multiple of four times the committed amount, there is a clear implication that a successful outcome for the funder would yield a significantly higher multiple, representing a very lucrative return on investment for the funder.  

Justin Le Patourel v BT Group Plc and British Telecommunications Plc [2021] CAT 30 

Hot on the heels of Merricks, on 27 September 2021, the CAT granted a CPO in favour of Mr Justin Le Patourel. The CPO enables Le Patourel to act as class representative for 2.3m landline-only customers in a £600m ‘opt-out’ group claim against BT for overcharging allegedly arising from BT’s dominant market position. Like Merricks, Le Patourel is a consumer champion, being the founder of the consumer group Collective Actions on Landlines.

The CAT’s decision in this case is particularly interesting, and extends the law set out in Merricks. In particular, the CAT made clear in this case that ‘opt-out’ group claims can be obtained in cases where primary liability (i.e. a breach of competition law) has yet to be established. Unlike in Merricks, where the class has the benefit of a final European Commission ruling that Mastercard acted anti-competitively, the class in Le Patourel rely on the provisional findings of an Ofcom market review. The Le Patourel claim is not therefore a ‘follow-on’ damages claim, and the class representative must establish primary liability on the part of BT as part of the proceedings.

While the CAT accepted that the Ofcom report was not a determinative finding of abusive pricing, it held that it was nevertheless a “comprehensive body of evidence relating to the subject matter” of the claim, such that an ‘opt-out’ CPO should be granted to allow the claim to proceed.

This is significant because it means that if a class representative can gather together sufficiently compelling evidence of anti-competitive behaviour (so as to render the claim more than “fanciful”), the class representative may be able to obtain an ‘opt-out’ CPO, even if there hasn’t been a formal finding of anti-competitive behaviour by the European Commission or Competition and Markets Authority. This being so, while Merricks may be regarded as opening the door for CPOs, BT v Le Patourel takes us a step closer to floodgate territory. The CAT has since rejected BT’s application to appeal the CPO.

Given that the purpose behind introducing the ‘opt-out’ CPO regime was to increase the likelihood of consumer claims to recover losses incurred as a result of anti-competitive behaviour, the judgment in Le Patourel v BT must largely be regarded as a positive development (save from the perspective of large corporates who may have engaged in anti-competitive behaviour).

Justin Gutmann v First MTR South Western Trains and another

The CAT granted its third CPO on 19 October 2021, when it certified two applications by Justin Gutmann for a collective proceedings order relating to claims against train operating companies (“TOCs”). This means that Mr Gutmann is now authorised to act as representative for a class comprising around 3 million members in ‘opt-out’ claims that allege abuse of a dominant position by the TOCs. The claims allege that failure by the companies to make boundary fares sufficiently available and/or to use their best endeavours to ensure general awareness among customers of those boundary fares resulted in many customers overpaying for part of their rail journey (Justin Gutmann v First MTR South Western Trains Limited and Stagecoach South Western Trains Limited; and Justin Gutmann v London & South Eastern Railway Limited [2021] CAT 31).

This judgment is significant owing to the CAT’s consideration and useful guidance on the application of the Eligibility Condition (defined above). The TOCs argued that the claims were not suitable for collective proceedings, because there was a need for individual factual assessments to establish whether all of the identifiable class members had a valid claim. Citing the judgment in Merricks and principles set out by the Canadian Supreme Court, the CAT confirmed that it is not necessary for common issues between class members to predominate over non-common issues: the CAT will favour certification where several significant issues are common issues.

The CAT also rejected the TOC’s submission that the claim could not be eligible if “more than a minimal number” of class members did not actually suffer a loss (though the CAT confirmed that this is a point to which it would give general consideration). This demonstrates the CAT is a claimant-friendly forum, in contrast to representative proceedings under CPR 19.6 before the High Court. While the CAT has power to award damages to a class in aggregate (i.e. to the class as a whole without assessing each individual’s specific loss), the Supreme Court recently made clear in Lloyd v Google [2021] UKSC 50 that representative proceedings under CPR 19.6 cannot proceed where an individual by individual assessment of damages is required. As such, while the Gutmann CPO achieved certification before the CAT, it is unlikely the claim could have proceeded as a representative action before the High Court.

What Next?

While practitioners now have three CPO decisions to work with, there will certainly be more precedent setting judgments handed down in short order. It is important to remember that the CPOs are not the end of the story in these claims. They simply mean the class representatives have cleared the necessary hurdle to progress from what would usually be considered the starting line in standard litigation. Many more novel questions will need to be considered by the CAT before the claims can be finally determined, including the actual merits of the claims against BT and the TOCs, and what the CAT will consider to be a “just” division of damages between the relevant claimant classes.

As alluded to above, CPOs are contemplated in the on-going FX and Trucks litigation, in addition to new CPOs against Apple, Google, Qualcomm and Thameslink. It will also be interesting to see how the CAT resolves the carriage dispute between two claimant law firms in the FX litigation.

Given the Supreme Court’s recent controversial decision to deny the potential billion-dollar representative action under CPR 19.6 in Lloyd v Google, it is likely that the CAT will be the favoured forum for large scale group claims (assuming creative claimant lawyers can find an appropriate competition law angle). Very exciting times indeed…

Caroline Harbord is a Senior Associate, and Candice Johnson is a Trainee Solicitor, at Forsters LLP:

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