The Consumer Rights Act 2015 (CRA or the Act) came into force on 1 October 2015, with the Department for Business, Innovation & Skills (BIS) hailing it as the “biggest overhaul of consumer rights in a generation”.

In terms of competition law, the overarching aim of the CRA is to facilitate private actions for damages for competition law infringements and in particular to make it easier for small business and end consumers to bring such claims. To achieve these goals, the Act widens the types of the competition cases that the Competition Appeal Tribunal (CAT) hears and introduces procedural improvements, such as longer limitation periods and a fast-track procedure for simpler cases. Most importantly, the Act overhauls the current collective actions regime by replacing a seemingly unsuccessful opt-in regime, with an opt-out option. 

CAT’s widened jurisdiction and procedural improvements
Under the old regime, the CAT could only hear so called follow-on cases, where an infringement had already been found by a competition authority or a sector regulator. Consumers and businesses had to bring all stand-alone cases before the High Court or the Court of Session. Under the new regime, the CAT will hear stand-alone claims as well as follow-on claims. The CAT will also have the power to grant injunctions, such power previously being reserved to the courts.

The CRA also introduces procedural improvements: a fast track procedure and longer limitation periods. To enable simpler cases brought by individuals and small and medium enterprises (SMEs) to be resolved quicker and at a lower cost the new regime introduces a fast-track procedure. The faster procedure will likely apply to cases with a small number of parties involved and lower evidential burden, where the facts are not heavily disputed and there are no issues of access to evidence or document disclosure. It is intended to effectively protect SMEs against competition law infringements; albeit in practice this protection will be restricted to straightforward cases only (of which there may be few).

Under the new regime, the time limit for claims to be brought before the CAT (limitation periods) have been extended and are in line with the time limits for claims before the High Court. Now claimants bringing proceedings in the CAT will have six years from the date the claimant suffered loss (five years in Scotland) to bring a claim. This is a significant improvement compared to the two year limitation period under the old regime. However, the rules on limitation periods remain complex and there are a number of exceptions and nuances to consider when contemplating a claim, which will prove particularly important for transitional cases that span over the two regimes.  

Collective actions and opt-out collective settlements
The CRA strengthens the collective actions provisions by enabling cases to be brought by representatives on behalf of a group of claimants (individuals and/or businesses) to obtain compensation for their losses on an ‘opt-out’ basis. An opt-out regime means claimants are automatically included into the action unless they “opt-out” in a manner as decided by the CAT on a case by case basis. Such actions may only be progressed if the CAT makes a collective proceedings order. The opt-out regime is intended to enhance consumer participation in the private damages litigation to ensure compensation to the end consumer for competition law breaches, which under the old regime was rarely achieved in practice.

The Act also introduces an opt-out collective settlement regime whereby those who have suffered loss and alleged infringer(s) may jointly apply to the CAT to approve the settlement of a dispute on an opt-out basis.  This should assist in achieving timely and cost effective results.

Under the new rules, any appropriate representative, such as a consumer body or trade association may bring claims on behalf of consumers or businesses, provided that the claims raise the same, similar or related issues of fact or law. This is contrasted with the old regime, where opt-in claims before the CAT could only be brought by the Consumer Association (Which?), which had a limited success rate of one collective claim representing less than 0.1 per cent of the consumers affected by the cartel (The Consumer Association v JJB Sports Plc.). 

Damages and legal funding
Thoughts that the new opt-out regime is as favourable as the US regime, however, would be misguided.  The CAT is only allowed to award compensatory damages and is prohibited from awarding exemplary (punitive) damages in collective proceedings. This left a number of commentators to argue that the Act does not go far enough, in particular in comparison to the US style treble damages system. However, the amounts of awarded damages for competition law infringements in the UK are bound to rise because the claims will be on an opt-out basis and the CAT will calculate damages on an aggregated group basis. Under the CRA, any unclaimed funds from a successful collective action will go to a designated charity.

Legal funding may prove to be a sore point. The CRA includes a ‘loser pays cost’ principle and does not allow damages-based agreements (where some of the damages are paid to the legal representatives). The CRA however allows the CAT to order that all or part of the unclaimed funds cover claimant’s legal costs. There are alternative funding opportunities and it is projected that third party funding and after the event (“ATE”) insurance market will see growth as a result of the changes introduced by CRA.  

Voluntary redress schemes
The CRA also introduces voluntary redress schemes, which are designed to encourage parties who are found liable for a breach of competition law to enter into negotiations with consumers or businesses where possible, instead of going for the more expensive and time consuming litigation route. A redress scheme is a mechanism to settle claims outside of court. The Act enables the Competition and Markets Authority (CMA) to certify voluntary redress schemes that are entered into by businesses that have been found to have infringed competition law. A voluntary redress scheme may be put forward for the CMA’s approval prior to an infringement decision or after the decision has been made. Remedies are available if the voluntary redress scheme is breached by bringing a proceeding before the court. The CMA has issued draft guidance on its approval of voluntary redress schemes for consultation. The CMA states that it will consider whether, if approved, it is appropriate to take such a scheme into account when setting the fine for competition law breach. There is no right to a reduction of a penalty, but the CMA expects a penalty discount to be up to a maximum of 20 per cent. However, compensation under a redress scheme approved by the CMA is entirely optional and potential beneficiaries who decide not to apply for redress under the scheme may seek individual compensation. Thus, in certain cases the attraction of the redress scheme may be limited, because even if approved, businesses may still remain liable for any other third party actions for damages from the beneficiaries who decide not to apply for redress under the scheme. 

Transitional period
Perhaps the most controversial and disappointing aspect of the CRA is the last minute inclusion of the transitional provisions. In effect, the changes introduced by the CRA may not become active for some time as they only apply to claims arising after 1 October 2015. The test for when a claim arises is when a cause of action is complete, i.e. when competition law infringement occurred and the damage was suffered. Former rules continue to apply where the claim arose before 1 October 2015. This raises a number of legal complications, in particular in relation to the possibility of stand-alone claims and collective redress cases in the transitional period. The position will be even more complicated for cases where the infringement spans across the two regimes. Taking into account that competition law infringements run for a number of years before their discovery and infringement decision, it has been estimated that the transitional period may apply for a decade. 

European perspective
At the EU level, the long awaited EU Damages Directive for competition law claims was adopted in November 2014 and the Member States will have to implement it into their legal systems by December 2016. The Directive aims to harmonise national laws of the Member States to aid compensation for all victims of infringements of the EU competition law. Most importantly, the Directive ensures easier access to evidence, clarifies the legal consequences of the ‘passing-on’ defence, establishes a rebuttable presumption that a cartel causes harm and deals with joint and several liability. A final infringement decision by a national competition authority of a Member State will have to be recognised as prima facie evidence of infringement before the courts of another Member State. Thus, actions for competition law private damages are shaped to increasingly become a pan-European event.  

Concluding remarks
Businesses and consumers will benefit from the fact that claims will now be considered by a specialist tribunal established specifically to deal with competition cases and equipped with new procedural powers. Consumers will in particular benefit from the new opt-out collective actions and from the fact that collective actions may be brought by any consumer body, such as a trade association.

Businesses will certainly face greater competition law compliance risks as private actions for damages following a competition law infringement are geared towards a probability (if not a certainty), rather than a mere possibility. The European Damages Directive aims to make this a reality across the EU.

These positive changes for consumers and businesses seeking redress for competition infringements may indeed be seen as the “biggest overhaul in a generation”, however they come with a serious caveat – a transitional period that may in effect last for a generation. 

At the very least, it should act as a wake-up call for businesses to get their competition law compliance in order because these changes will certainly increase financial exposure to private litigation in the years ahead. 

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