26 August 2016

New beginnings - Class actions in the UK

This article was written by Sarah Turnbull and Victoria Keenan.

The UK’s class action regime has been in place for less than a year, but has already attracted a £19 billion collective action against MasterCard.

On 1 October 2015, the UK’s Consumer Rights Act brought the UK's regime for collective actions for competition damages claims into force. This new regime is part of an effort by governments across Europe to promote private enforcement as a means of obtaining redress for harm suffered as a result of breaches of competition law.

The Competition Appeals Tribunal, the UK’s specialist competition tribunal (CAT), is now able to certify claims by consumers and businesses as eligible for collective proceedings if they raise “the same, similar or related issues of fact or law” and are “suitable to be brought in collective proceedings”. Claims can be brought by a third party representative or a class member on either an opt in or opt out basis. In opt out cases, there is no need to identify all individual claimants and specify their cases: the claim can be brought on behalf of the whole group and any damages will be awarded to the whole group. Unless claimants take steps to opt out of the claim, they will automatically be included.

Details of the UK’s first ever class action were published by the CAT on 21 June 2016. The National Pensioners Convention (NPC), a pensioners’ welfare association, issued an application for an opt out collective action seeking damages from Pride Mobility Products Limited (Pride), a manufacturer of mobility scooters, on behalf of anyone who purchased a Pride mobility scooter between 2010 and 2012. The action is based on a 27 March 2014 decision by the Office of Fair Trading (OFT) (now the Competition and Markets Authority) which found that Pride had infringed competition law by entering into agreements and concerted practices aimed at prohibiting the online advertising of prices for certain models of mobility scooters below Pride’s recommended retail prices. A report commissioned by the NPC (made public following a case management conference on 15 July 2016) estimates the class size to be between 27,200 and 32,400 people, with total damages ranging from £2.5 million (plus interest) if the class size is limited to 27,200 claimants, to £4.18 million (plus interest) in a larger class scenario. The NPC has applied to the CAT for a Collective Proceedings Order (CPO) enabling it to bring its action forward. The hearing for the CPO application is due to be held on 12 and 13 December 2016.

Of particular interest is the way the proceedings are funded. While the UK recently removed the blanket prohibition on contingency fees, the new Damages Based Agreements regime expressly disallows the use of such agreements for collective actions. The proposed claim against Pride is being funded on the basis of both conditional fee agreements (“no win no fee” with a potential uplift if the case succeeds) and after-the-event insurance (to cover any adverse costs orders). As part of its review of the case for the purpose of deciding whether to make a CPO, the CAT must consider whether the proposed funding arrangements are both adequate and proportionate to the compensation being sought.

The UK’s second class action is due to be filed imminently. Walter Merricks, the UK’s former Chief Financial Ombudsman, reportedly intends to bring a £14 billion[1] collective action against MasterCard on behalf of UK consumers. The action follows a European Court of Justice ruling that MasterCard breached competition law by imposing illegal interchange fees on payment transactions between 1992 and 2008. If filed, this will be the largest claim in UK legal history.

The outcome of these landmark cases will be followed closely by practitioners and will shed light on the practical application of the new regime. The CAT’s chosen approach in these first few cases will set the tone for claimants considering making a claim under the UK's new procedure.

[1] The collective action was originally estimated to be worth £19 billion, but KWM understands that the value of the action has now been amended to £14 billion on the basis of evidence produced to date.

Want to know more?

The Review: Class Actions in Australia 2015/2016 examines key class action decisions from July 2014 to June 2015 as well as current proposals for reform. It provides an analysis of how these decisions are likely to affect future proceedings for both plaintiffs and defendants, and also looks at emerging trends in class action regimes around the world. 

This is the fifth annual report released by King & Wood Mallesons’ Class Actions & Regulatory Investigations Practice, which has worked on some of the largest and most complex class action matters in Australia.

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