As noted in our earlier post, since 1 October 2015 it has been possible to bring opt-out collective actions under the Consumer Rights Act 2015, to be heard by the Competition Appeals Tribunal (CAT).
At that time we noted that the new regime was expected to result in more private enforcement of breaches of competition law. Five months on, the first claim under the new legislation has been launched. The action, mooted by lawyers for the UK National Pensioners Convention (a pensioners’ association) seeks compensation from Pride Mobility Products (Pride) on behalf of all UK domiciled class members, with a value of up to £7.7M.
The proposed class action follows a UK Office of Fair Trading (OFT) finding in 2014 that Pride had engaged in resale price maintenance by banning online retailers from advertising Pride scooters at levels below a recommended retail price. The class action claims this ultimately caused the claimants to pay more for the scooters.
Changes under the Consumer Rights Acts 2015
Prior to the 2015 reforms, it was only possible to bring opt-in collective actions before the CAT. The purpose of introducing opt-out class actions was to allow “consumers and businesses to easily achieve redress for losses they have suffered as a result of breaches of competition law”, and reflects a key recommendation of the Civil Justice Council’s Improving Access to Justice through Collective Actions Final Report, which concluded that, in cases where there is a common grievance shared by a class of claimants, an opt-out class action regime provides better access to justice and judicial efficiency.
A key safeguard to the new provisions is the requirement that class actions brought under this provision must be certified through the making of a collective proceedings order. This may only be made where the CAT considers the person bringing the proceedings is a person who the CAT could authorise to act as the representative in those proceedings and the claims raise the same, similar or related issues of fact and law and are suitable to be brought in collective proceedings.
The claim against Pride
The solicitors for the NPC state that the claim against Pride could affect around 34,000 consumers and be worth up to £7.7milllion (approximately AU$14.6 million).
As this is the UK’s first potential opt-out class action, the case is being watched with interest to see whether it will be granted a collective proceedings order.
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” arrangements for their own costs, 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 collective proceedings order, the CAT must consider whether the proposed funding arrangements are both adequate and proportionate to the compensation being sought. If met with approval, indicates we could see an increased number of applications for collective proceedings orders as funders see opportunities from the new regime.
Based as it is on an earlier OFT infringement decision, the CAT will proceed on the basis that liability is in principle established, with issues focussed on causation and the calculation of any loss. As this serves to limit the scope of proceedings and therefore the costs to be incurred, the case in many way represents a modest beginning for the new regime. Indeed, the case may not reach the CAT, with lawyers for the National Pensioners Convention stating that they are awaiting Pride’s response to a collective settlement proposal.
Relevance to Australia – claimants and comparisons
Under the new UK regime, the CAT opt-out procedures only apply to UK claimants, and non-UK claimants will still need to opt-in for any class action brought in the English courts.
Australia already has a mature and widely used class action procedure in the Federal Court and state Supreme Courts, for which opt-out processes apply to both domestic and overseas class members.
KWM’s The Review – Class Actions in Australia 2014/2015 noted that at least 33 new class actions were launched in the 12 months leading up to June 2015. In Australia, however, contingency fees remain prohibited in all States and Territories, with the Federal Government yet to respond to a December 2014 recommendation by the Productivity Commission to remove the existing ban on charging of “damages-based” or contingency fees by lawyers (other than in relation to criminal and family law matters), subject to the introduction of additional consumer protection measures.