The low down
Debates concerning the role and procedures of the Competition Appeal Tribunal mirror the UK’s dilemma post-Brexit. Are its excellence, diligence and the quality of its judgments part of Britain’s ‘soft power’ in the world, giving business the confidence in this jurisdiction? Or is the tribunal a brake on the laissez-faire economics that the pro-Leave camp expect to energise ‘Britain in the World’? Certainly, competition law specialists like and respect the CAT, and believe the broad alignment of its principles with EU law smooth the transition to a post-Brexit economy. But influential Conservative voices are among its critics, and with its caseload expected to increase by 40-50%, stretched resources could affect its performance.
In April 2019 a dozen barristers from Brick Court Chambers wrote to the business secretary Greg Clark. ‘The administration of justice before the CAT in Competition Act cases is the envy of the world,’ they said. ‘The CAT’s substantive judgments are enormously respected…[and] routinely cited in the EU courts and in judgments in other legal systems as far flung as South Africa and Hong Kong.’
The barristers were responding to Andrew Tyrie, then chairman of the Competition and Markets Authority. In a letter to Clark two months earlier, Tyrie had criticised the Competition Appeal Tribunal for its ‘increasingly extensive use of oral witness evidence and cross-examination, with the result that hearings on a single appeal often last for four weeks or more’. This had gradually diverged from when proceedings were primarily paper-based, and hearings lasted no more than one or two days.
Tyrie also criticised the appeal process for being ‘complicated and prolonged by the admission, at appeal stage, of new evidence that could have been provided to the CMA before it came to its decision’.
Adding to concerns about CAT is the way it reviews the regulators’ decisions on Competition Act cases. While it hears appeals on mergers by way of judicial review (the regulator’s decision will stand bar illegality, irrationality or procedural impropriety) the tribunal applies a ‘full merits’ standard to appeals concerning anti-competitive agreements or market abuse. This effectively means a rehearing.
The CAT is one of the real success stories of the ‘new’ UK competition regime that was put in place by the Competition Act 1998
Becket McGrath, Euclid Law
Post-Brexit, the CMA was expected to be taking on large, complex cases from the European Commission. Tyrie recommended moving away from the full merits standard (either to a judicial review standard, or to a new standard) and amending the procedural rules of the tribunal to address ‘concerns about the effectiveness and efficiency of the current appeal process’.
Tyrie’s proposals have not been taken forward, but in his ‘Power to the People’ report on UK competition policy published in February, Conservative MP John Penrose returned to the theme. In his government-commissioned independent review last September, Penrose concluded that, despite there being ‘plenty of agreement’ that the current process (from launching a CMA investigation to completing a potential CAT appeal) is ‘cumbersome and clunky’, there was also ‘no consensus on how to put it right’.
Penrose recommended the government set up a taskforce to undertake ‘an end-to-end review and redesign of procedures and case management in CMA and CAT’, including appeal standards, and also consider a ‘prosecutorial model’ for cases.
The reformed process, according to Penrose: must resolve all but the small number of the most complicated cases (competition, consumer or mergers) ‘within weeks or months rather than years’; be ‘as predictably simple and certain as possible’; and fulfil the ‘fair trial’ requirements of Article 6 of the European Convention on Human Rights.
What it does and how it works
The Competition Appeal Tribunal was created by the Enterprise Act 2002 and came into being the following year. It is wholly funded through grant-in-aid from the Department for Business, Energy & Industrial Strategy (£4,997,000 in 2019/20).
The tribunal has a wide remit, which includes hearing appeals against decisions by: the CMA and several sector regulators under the Competition Act 1998, and articles 101 and 102 of the TFEU; the Office of Communications (Ofcom) under the Communications Act 2003; and the CMA or the secretary of state for BEIS on merger and market investigations under the 2002 act.
The Consumer Rights Act 2015 extended the tribunal’s jurisdiction in private law actions to any claim for damages for infringements of competition law (whether ‘follow on’ and ‘standalone’), as well as collective actions on an ‘opt-in’ and ‘opt-out’ basis.
Cases are heard and decided by a three-member panel made up of either the president (Mr Justice Roth) or a chair plus two ordinary members. The chairs (from a list of 19) are judges of the High Court of England and Wales (and equivalent courts in Scotland and Northern Ireland) and senior lawyers. The 23 ordinary members are experts in law, business, accountancy, and economics.
CAT received 27 new cases in the seven months to 31 October 2020 (compared with 18 in the full financial year 2019/20), according to data from BEIS, which noted ‘a large increase’ in the number of private damages actions transferred from the High Court to the CAT following the expansion of the tribunal’s remit under the CRA 2015.
Average duration (based on analysis of a sample of three types of case between October 2015 and September 2020) is 96 calendar days for merger reviews (from registration to the main judgment) and 388 days for competition appeals. However, this falls to 314 days without Paroxetine and Phenytoin (which lasted 696 and 485 days, respectively). Ofcom’s appeals to the tribunal under the CA 2003 took 360 days (in 2017 these appeals were switched from a ‘full merits’ to ‘enhanced judicial review’).
So how do practitioners rate the tribunal? ‘In my view, the CAT is one of the real success stories of the “new” UK competition regime that was put in place by the Competition Act 1998,’ says Becket McGrath, a partner at Euclid Law. ‘It has proved to be an effective and independent tribunal that is prepared to overturn decisions that are insufficiently well reasoned and to pick up material procedural defects, while showing sufficient deference to authorities’ discretion.’
McGrath cites the tobacco Competition Act case and the Skyscanner merger case as examples of ‘effective review’ where the tribunal overturned the CMA’s decisions.
There are also plenty of examples where CAT has upheld the regulator’s decisions, the latest being in the Lexon antitrust case, or earlier in Ecolab, which is ‘a good example of a case where the CAT dismissed all of the applicant’s arguments and upheld the CMA merger decision in full’, McGrath notes.
Oxera partner Dr Gunnar Niels describes CAT as ‘a top competition court by any global standard’ and Sir Peter Roth, the tribunal’s president, as ‘one of the top competition judges in the world, and recognised as such’. Enhancing the CAT’s rigorous economic reasoning is the fact that one of the three tribunal members is often an experienced economist, Niels observes: ‘Cases are dealt with within a reasonable timetable compared to other jurisdictions, and the process is well-managed, including the hearing of experts and witnesses.’
According to McGrath, the speed with which the tribunal deals with cases, especially in merger control, is ‘a real strength and compares particularly well with the EU’s General Court’.
Six months is typical for CAT merger appeals. For example, the Ecolab and JD Sports appeals lasted about six months from application to judgment, despite Covid-19, McGrath points out, while urgent cases can be heard ‘exceptionally quickly’. For instance, the challenge to the Lloyds/HBOS decision by the secretary of state was decided in two weeks.
In contrast, the General Court’s judgment in Hutchison/Telefonica took almost four years, although the EU court was quicker in the two Liberty Global/Ziggo merger appeals, each of which took just over two years (July 2015-October 2017 and November 2018-January 2021) but this was still much slower than the CAT, McGrath says.
Macfarlanes senior consultant Stephen Kon agrees that on mergers, a big advantage of the UK system is that there is a possibility of effective remedies given that appeals can be expedited and decided rapidly.
But on competition enforcement, Kon says: ‘There is a legitimate question whether the more limited judicial review standards applied in EU law to appeals before the General Court would enable the CAT to operate more efficiently and speedily.
‘Full appeals from CMA decisions are burdensome both for the CAT and the parties: costs are substantial and there is often a duplication of evidence, as well as the introduction of new evidence which could have been made available in the CMA proceedings.’ This in turn can lead to long hearings which can last for many weeks and often significant delays in judgments being handed down, Kon says.
Yet it is not as simple as deciding between the EU and UK method of assessing competition appeals. Kon says: ‘It is suggested that the EU approach before the General Court is often unsatisfactory and too limited, and that while some improvements and evolutionary changes to the CAT’s procedures may be desirable, such changes should be modest and we should not move to a judicial review process analogous to that applicable in the EU.’
Slaughter and May partner Isabel Taylor recognises that ‘how long hearings take varies a lot depending on whether it is a full merits appeal under the Competition Act 1998 or judicial review’. But she is also ‘not sure that length of hearing is quite the right metric to assess the overall effectiveness of the CAT process as a whole’.
For Niels, ‘removing the “full merits” standard from CAT appeals is a not a good idea. It comes up every few years in debates about the legal regime. So far this has been rejected and it should be again’.
Cases are dealt with within a reasonable timetable compared to other jurisdictions, and the process is well-managed, including the hearing of experts and witnesses
Dr Gunnar Niels, Oxera
Niels contends that ‘it is precisely the “full merits” standards that makes the CAT appeals so rigorous. All the evidence, including from experts, is properly heard and tested, and so any proposal to reduce the reliance on oral evidence is also not a good idea’. He points to ‘sound mechanisms to deal with the inevitably complex expert economic evidence’, such as expert meetings, joint agree/disagree statements and ‘hot-tubbing’.
‘Short of a prosecutorial system, it is good policy to have a rigorous appeal process so as to avoid the competition authorities becoming prosecutors and adjudicators,’ Niels says. ‘This is all the more important at a time when there are worldwide calls for more proactive and interventionist competition policy to deal with issues of growing market power, in particular in digital markets. Robust reviews of decisions and judgments are a vital part of a well-functioning competition regime.’
McGrath also takes issue with Tyrie’s proposals. ‘This isn’t because I am a member of a self-serving caste of practitioners who want to protect their own financial interests, as was suggested at the time,’ he says. ‘A move to a JR-based standard would clearly have run the risk of lowering the quality of CMA and sectoral regulator investigations and decision-making on antitrust cases, which is not in anyone’s interest.’
Penrose stopped short of recommending changing to a prosecutorial model for competition enforcement cases, leaving the issue for the taskforce to consider. McGrath comments that despite there being ‘some merit’ in such a move, ‘this would be a major change that would be bound to have a negative short-term impact on enforcement. For now, the CMA has enough on its plate, including in particular the establishment of the new digital markets regime’.
But Penrose did recommend that all appeals against regulator decisions (some are appealed to the High Court, some to the CAT or other tribunals, and others to the CMA) should instead be dealt with by CAT; he also proposed the creation of fast-track ‘county competition courts’ for local and regional cases. This would be a tier below existing CAT fast-track cases with ‘very tight case management, a low cost cap for losing firms and a 1- or 2-day maximum hearing length too’.
On Penrose’s first recommendation, Taylor says: ‘I can see the logic for this at a high level, but it would be quite a change in the nature of the CAT’s functions for it to hear, for example, price control reviews.’
McGrath says the Penrose report contains ‘a mix of good and bad ideas but the details were largely brushed aside’. CAT already has jurisdiction to hear appeals on a range of regulatory matters – from telecoms and postal services to energy and civil aviation, while the CMA also has regulatory appeal jurisdiction in specific areas, where it can draw on its expert staff of economists and financial analysts. ‘While the CAT has general jurisdiction to review Ofcom regulatory decisions, the law stipulates that any price control aspects of appeals must be referred to the CMA for determination,’ says McGrath, adding this ‘reflects an appropriate allocation of responsibilities that a general suggestion that things would be better if everything were moved to the CAT ignores’.
James Marshall, partner in the global antitrust practice at Covington, is among those supporting the idea of consolidating appeals within a specialist body. This, he says, ‘makes good sense as it will allow the CAT to build on its current expertise and provide stakeholders with a clear and predictable path for judicial challenges’. Keith Jones, co-head of the EU, competition and trade practice group at Baker Mckenzie, also thinks this ‘appropriate’, highlighting ‘curious anomalies, where the CMA is sometimes the appellate body’. For example, there are some regulatory appeals from Ofgem relating to licence conditions that end up with the CMA as appellate body.
On Penrose’s second proposal, Jones says ‘a regional competition court would be interesting to say the least. I can see, say, more centres such as Manchester, Leeds, Edinburgh, Glasgow with capacity would be useful’. But he remains unconvinced that county courts will work, although conceding his experience may be outdated.
McGrath worries about a shortfall in expertise under this proposal. ‘One of the great benefits of the UK system is that difficult competition law questions are considered by specialist tribunals in the CAT or by high-quality senior judges in the general courts. Establishing specialist local courts could eventually help spread expertise but at a cost to the system, as this expertise is not widespread,’ he says.
And it is not as if the tribunal failed to evolve, including recently. Significant changes to its jurisdiction and procedures were introduced via new rules in October 2015, reflecting two key pieces of legislation – the Consumer Rights Act 2015 and the Section 16 Enterprise Act 2002 Regulations 2015. This has increased the range and complexity of the tribunal’s caseload.
Morgan Lewis partner Omar Shah says that actions for damages for breach of competition law are increasingly being transferred to the CAT. He expects this trend to continue even if new damages actions are commenced in the High Court. That is because Section 16, which came into force on 1 October 2015, allows the High Court to transfer proceedings (involving infringement issues relating to Chapter I or Chapter II of the Competition Act or Article 101 or 102 of the TFEU) to the tribunal for determination.
‘The transfers are in order to take advantage of the specialist expertise of the CAT panel and support staff; as well as, frankly, to ensure the CAT has sufficient caseload,’ says Shah.
The CRA 2015 amended the 1998 act by introducing an ‘opt-out’ collective proceedings regime for damages claims (which means they can now be brought to the tribunal for an entire class of claimants without needing to identify every one of them).
Kate Pollock, partner and head of the competition litigation department at Stewarts, notes ‘a significant spike of activity’ this year following the long-awaited Merricks v Mastercard Supreme Court judgment in December which clarified the criteria for certification of collective proceedings. The case is a £14bn claim against Mastercard for alleged unlawful anti-competitive conduct led by Walter Merricks, a consumer representative, on behalf of around 46 million British consumers.
‘The judgment has unlocked the logjam of [collective proceedings order] applications that had been stayed, in some cases for as long as two years,’ Pollock says. ‘As such, while no claim has yet to achieve certification since the collective proceedings regime was introduced in October 2015, it’s now only a matter of time before that changes and matters start to progress.’
Kenny Henderson, a partner at CMS, expects competition class actions to become ‘a key area of activity’ for the tribunal. ‘The CAT has sole competence for these claims which cannot be filed in the High Court. So its diet of these claims is set to increase,’ he says, ‘notwithstanding the Merricks ruling, the mechanism is still in its infancy with many questions unanswered and so the CAT will be ruling on novel points for the short- to medium-term.’
‘This judgment has been widely seen as a litmus test for the nascent competition class action regime in England and Wales, and gives clear guidance on the test to be applied at the certification stage for collective actions – guidance which has markedly lowered the bar,’ explains Marshall. While it is expected to have ‘a significant impact on collective actions in England and Wales for years to come’, Marshall says its real effect will be seen ‘as the CAT seeks to follow the Supreme Court’s guidance in the numerous CPO application hearings that are currently before the CAT, including in the Merricks v Mastercard dispute itself’.
The fast-track procedure for individuals and small businesses is another reform by the CRA 2015 to the UK regime for the private enforcement of competition law, allowing the CAT to provide ‘an effective and quick forum for competition law disputes’, according to Marshall. In fast-track cases the final hearing is within six months and recoverable costs are capped. The procedure has featured in 10 cases, according to the Department for Business, Energy & Industrial Strategy (BEIS), including Socrates v The Law Society and Melanie Meigh v Prinknash Abbey Trustees.
But what about Brexit and the extent to which it will affect the CAT?
In the area of competition litigation, Pollock expects little practical change, at least in the short-term. She explains that European Commission decisions will continue to be binding evidence of a breach of competition law under the 1998 act provided the commission started its investigation before 1 January 2021 (known as ‘continued competence’ cases). ‘This means that claimants will be able to continue to bring follow-on damages claims arising from up-and-coming European Commission decisions, rather than seeing a sharp cut-off post-1 January 2021,’ Pollock says. ‘As and when commission decisions fall outside the continued competence, which will become the norm within the next few years, claims can still be brought on a standalone basis. While decisions of EU courts may not be binding in those circumstances, we anticipate that the CAT will view them as having strong persuasive authority.’
Henderson, however, says: ‘It is possible that we will see less business-to-business and follow-on damages litigation where the claimants have a choice of forum where to file their claims. England has been successful in attracting these claims in recent years, with its main competitors being the Netherlands and Germany. Given the uncertainties of Brexit, a hypothetical French in-house lawyer with the choice of filing in England or the Netherlands may choose the Netherlands rather than England out of concern over procedural problems caused by Brexit.’ But he says that class actions are different, because a claim on behalf of the UK opt-out class cannot be filed elsewhere in Europe and so Brexit should not result in fewer such claims.
Shah expects the rest of the tribunal’s caseload to increase ‘significantly’ as more large cases come under the CMA’s jurisdiction post-Brexit, notably high-value mergers and abuse of dominance cases which are more likely to be the subject of complex and lengthy appeals. The CMA has said that it expects a 40-50% increase in its annual mergers workload.
The CAT could also become the judicial forum for hearing challenges to subsidy schemes and awards, given that the UK has to put in place its own subsidy control regime under the EU-UK Trade and Cooperation Agreement. This option was part of a UK government consultation which closed on 31 March. But, along with the expected increase in class actions, it will add to workload pressures that will need to be addressed, according to Kon.
In his report, Penrose says: ‘No institution or regulatory regime can remain unchanged while the world modernises around them, otherwise they will be left behind.’
In the medium- to longer-term, much may depend on whether the government decides to implement some or all of the reforms to the appeals process proposed by Tyrie and the CMA in 2019, and in particular to move towards a more limited basis for review of CMA’s decisions, which Kon says would be ‘more akin to grounds of appeal from EU Commission decisions to the General Court’.
In March, BEIS launched a two-month post-implementation review of the tribunal’s 2015 rules of procedures, in what Kon says ‘may be a first step in streamlining how the CAT operates’.
Marialuisa Taddia is a freelance journalist