UK Government Publishes Consultation to Promote Private Sector Challenges to Anti-Competitive Practices

May 8, 2012

On April 24, 2012, the UK Government published a consultation paper on methods to promote private sector challenges to anti-competitive practices in the UK. This consultation comes shortly after the UK Government announced proposed reforms to the institutional framework for the regulation and enforcement of competition law that it believes will deliver better outcomes for business, consumers and stimulate growth for the UK’s economy. (For further information in relation to the UK Government’s proposed reforms, please see Gibson Dunn’s March 19, 2012, alert, "UK Government Announces Merger between the Country’s Two Competition Authorities".)

In setting out its explanation of the purposes the consultation, the UK Government notes that its overarching objective is to encourage private-sector led challenges to anti-competitive behaviour in order to complement the UK’s existing competition enforcement regime, to the benefit of consumers and with a view to promoting productivity, innovation and economic growth. Moreover, the proposals run alongside developments at EU level, private antitrust enforcement being one of the three main objectives of the European Commission’s recent modernisation reforms.

Key Proposals

The consultation paper promotes four key proposals:

1. To establish the Competition Appeal Tribunal (CAT) as a major venue for competition actions in the UK and to make it easier for businesses, especially SMEs, to challenge anti-competitive behaviour that they believe is harming their business.

   This will include allowing cases to be brought even when they have not first been investigated by the Office of Fair Trading (OFT), empowering the CAT to grant injunctions and introducing a fast track procedure for SMEs that will allow simpler cases to be dealt with more expeditiously and cost-efficiently.  As part of its proposals to make it easier for smaller businesses to challenge anti-competitive behaviour, the UK Government is considering whether to introduce a rebuttable presumption of loss for cartel cases, likely to take the form of a presumption that a cartel had affected prices by a fixed amount, such as 20%.  This would mark a significant departure from traditional English law principles limiting recovery in civil claims, save in very limited circumstances, to actual losses proven by the claimant.

2. To introduce an opt-out collective actions regime for competition law, enabling consumers and businesses to bring litigation collectively to obtain redress for losses due to anti-competitive behaviour.

   Breaches of competition law, such as price-fixing, often involve very large numbers of people each losing a small amount.  As a result, it is often not cost-effective for any one individual to bring a case to court.  Existing English law rules on litigation costs operate as a powerful disincentive to claimants suing for small losses, and afford defendants an array of costs-related devices to be deployed in litigation with a view to encouraging early settlement, often on highly advantageous terms for defendants.

   In its consultation paper, the UK Government sets out a number of proposals in relation to the introduction of an opt-out collective actions regime, including which bodies should be permitted to bring opt-out collective actions, with law firms potentially, but not necessarily, being included in the list of permitted bodies.  In its consultation paper, the UK Government suggests that only actual losses could be recovered in such actions and that contingency fees would not be permitted.

3. To promote Alternative Dispute Resolution (ADR) to ensure that the courts are the option of last resort to deal with competition cases. The use of ADR can reduce costs and often results in cases being resolved more readily than traditional court-based actions. The UK Government is consulting on how to ensure ADR is the default option when bringing cases in the CAT and is considering a proposal to grant the OFT a power to encourage firms found to have breached competition law to provide restitution to those they have wronged.  Ultimately, however, if ADR is to become a practicable route for dealing with competition disputes, there is a significant extent to which this will have to be driven by private litigants, not by Government.
4. To ensure private actions complement the public enforcement regime, by protecting the incentives provided for immunity applicants in cartel cases. In particular, the UK Government is consulting on whether there are protective measures it can  implement to  ensure that private actions do not discourage firms from blowing the whistle on cartels.

The UK Government believes these measures will assist consumers and businesses in obtaining compensation for losses suffered as a result of anti-competitive behaviour, and by enabling more effective enforcement of competition law, stimulate growth and innovation.

Promoting Private Actions

According to the consultation paper, research by the OFT shows that businesses view the present approach to private actions as one of the least effective aspects of the UK competition regime. As it currently stands, challenging anti-competitive behaviour is beyond the resources of many businesses, particularly SMEs.  The UK Government also notes that whilst the responsible authorities are at the heart of the competition enforcement regime, they have finite resources. As a result, the UK Government is seeking to promote a greater role for private actions to complement the public enforcement regime.  

While the proposals in this consultation do not provide the kind financial incentives to private enforcement action that are available to antitrust claimants in the United States, in particular in the form of treble damages awards, it will be received with great enthusiasm by the emerging antitrust plaintiff bar in the UK, who will see it as a step towards the leveling of a playing-field they have long considered uneven.

Multi-party litigation brings a range of challenges with which litigators and courts in the UK are relatively unaccustomed to dealing, particularly as compared with their counterparts in the U.S.  It can be anticipated that proposals aimed at fostering collective litigation will be scrutinised with great care in Parliament, and will doubtless be cast as the thin end of a wedge whose thick end might be the (dreaded) "americanisation" of UK High Court litigation, with an increasingly aggressive plaintiff bar and a bleed-across of collectivisation from competition into environmental, product liability, financial mis-selling and other species of claims ripe for pursuit on a multi-party basis.

Moreover, if any of these proposals ultimately reach legislative form, and if they are perceived as successful in their early years of operation, it may not be long before equivalent proposals emerge in other EU Member States.  As a result, this is a very significant consultation not just for private cartel litigation in the UK, but for the future of antitrust enforcement across the EU, which will attract great interest in the UK and beyond.  The consultation is open until July 24, 2012.