Clear signals have been given about how the tribunal views the class action regime.
After a wait of more than a year from the introduction of class actions in the UK, there were two class certification hearings before the UK’s Competition Appeal Tribunal (CAT) in just over a month. Although in each case the CAT has yet to hand down its certification decision, the hearings have given some clear signals about how the CAT sees the regime.
Potentially the most significant issue was the funding question which arose in Merricks v MasterCard. The litigation, which is an opt-out collective action on behalf of 46 million consumers said to have suffered up to £14bn damages by reason of MasterCard’s interchange fee arrangements, is backed by a third-party funder.
According to the terms of the funding agreement, if the litigation is successful, the class representative is to use his best endeavours to obtain from the CAT, inter alia, an order that the funder should be paid the greater of £135m or 30% of the undistributed proceeds from the action.
Pursuant to section 47C(6) of the Competition Act 1998, the CAT may order that all or part of any damages not claimed in a collective action may be paid to the representative in respect of all or part of the ‘costs or expenses incurred by the representative in connection with the proceedings’. According to MasterCard, the envisaged payment to the funder does not constitute a cost or expense incurred by the representative but is, instead, a return on a funder’s investment and not something the CAT may order to be paid from undistributed proceeds. The CAT’s judgment on this issue will consequently be of enormous significance for the future funding arrangements of opt-out collective actions.
The two hearings are also instructive in terms of what the CAT will look for in certifying a class. The legislation requires that the CAT considers that the claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings. Sub-classes are expressly envisaged by the regime.
Gibson v Pride Mobility Products Ltd arises out of the 2014 finding by the Office of Fair Trading (OFT) that Pride Mobility Products Ltd (Pride) and eight retailers had infringed the 1998 act by entering into agreements and concerted practices aimed at prohibiting the online advertising of certain models of mobility scooter below Pride’s recommended retail prices. The proposed class was said to comprise any person who purchased a Pride mobility scooter in the UK during the relevant period. Four subclasses of consumer purchasers were identified:
- purchasers online from one of the eight retailers;
- purchasers from a physical store of one of the eight retailers;
- purchasers online from a retailer other than one of the eight retailers;
- purchasers from a physical store of a retailer other than one of the eight.
At the hearing, the judge asked the proposed class representative’s economic expert whether he had distinguished between the effects of the conduct as regards the eight and other retailers. On hearing that he had not, the judge concluded that he would be unable to distribute any award for aggregate damages between the proposed subclasses, and he therefore indicated that he felt unable to grant the proposed collective proceedings order. The CAT is now considering whether to refuse the application for certification of the proposed class, or to grant an adjournment to allow the proposed representative to reformulate the argument and/or to gather more evidence pertaining to distinctions between the subclasses.
In Merricks, the claim is brought on behalf of a single proposed class comprising approximately 46 million individuals who, between 22 May 1992 and 21 June 2008, purchased goods and/or services from businesses selling in the UK that accepted MasterCard cards, at a time at which those individuals were both: (1) resident in the UK for a continuous period of at least three months; and (2) aged 16 or over.
In considering the appropriateness of the proposed class, the CAT discussed whether a distinction should be made between:
- purchases from different retailers within a particular sector;
- purchases from retailers in different sectors;
- those using cash, cards or cheques;
- those who pay their credit cards off each month and those who do not.
Additionally, the CAT explored how account should be taken of different spending profiles of different segments of the population (for example, the young, childless and wealthy, the single parent on benefits, and so on). All of this would seem to suggest that the CAT has real concerns about the appropriateness of certifying a single class, and may insist that the class representative explore and identify sub-classes and methods of distributing damages between sub-classes before certification will be granted.
We will provide an update on these issues once the CAT has handed down its decisions.
Elaine Whiteford is a partner at Covington