Why the UK's opt-out collective proceedings regime must be allowed to succeed

The UK opt-out collective proceedings regime was introduced in October 2015 – but with a new regime and the inevitable number of interlocutory appeals in the early cases, it is only now that we are finally seeing cases reach conclusion and secure meaningful redress for consumers.

The first successful judgment in an opt-out claim last year in Kent v Apple illustrates the scale of harm the regime is capable of addressing with a £1.4bn award by the Tribunal against Apple in relation to excessive pricing on its App Store. Without an opt-out mechanism, claims of this nature would be unlikely to be brought at all, and unlawful gains would largely remain with infringers and anti-competitive behaviour will often continue unconstrained.  In the last 12 months we have also seen settlements reached in relation to unlawfully inflated interchange fees imposed by MasterCard (Merricks) and price fixing in relation to transport costs for new car deliveries (McLaren – Ro-Ro Claims). The regime has also seen the first awards of undistributed damages to the Access to Justice Foundation.   

This point is often lost on detractors of the regime, which is subject to continued lobbying, notably by the US Chamber of Commerce, and is currently subject to a review by the Department of Business and Trade. Those lobbying against the regime suggest that opt-out actions are anti-growth, unfairly impose costs on defendants and have a potential negative impact on foreign investment and growth. This ignores the importance of competition law in ensuring a fair playing field for businesses and that compensation awards correct the balance between infringing companies and harmed parties, with over half the collective actions which have been filed also including SMEs. 

Market conduct and litigation funding

Beyond individual compensation, opt-out collective proceedings serve a wider function within the competition enforcement landscape. By aggregating dispersed harm, they help ensure that breaches of competition law do not become economically rational simply because individual losses are too small to pursue. This function complements public enforcement by regulators and supports wider market confidence. It also ensures fair and competitive markets consistent with the government’s growth agenda.   

Against the above background, the Government’s recent announcement of its intention to legislate to reverse the effects of the Supreme Court’s decision in PACCAR Inc v Competition Appeal Tribunal, which held that certain damages-based litigation funding agreements (LFAs) constituted damages-based agreements, is a welcome and necessary development. Clarifying the enforceability of LFAs is critical to ensuring that the collective proceedings regime both in the CAT and other cases can function as Parliament intended. 

Public support and procedural legitimacy