Fast-track justice for competition claims

Fast-track procedures have been a feature of the Australian Federal Court system for a number of years, and have been used in a wide range of cases including the cartel damages action in Norcast v Bradken. Until October, the fast track process was limited to commercial and intellectual property cases. The recent introduction of the National Court Framework reforms, however, will extend the Fast Track mechanisms to all National Practice Areas.[1]

Similarly, in the UK, fast-track procedures form part of a comprehensive regime introduced by the Consumer Rights Act 2015 (Consumer Rights Act), which came into force on 1 October 2015 and aim to widen the types of competition cases heard by the Competition Appeals Tribunal (CAT), the UK’s specialist competition tribunal. The Consumer Rights Act has expanded the scope of the CAT’s jurisdiction and thereby increased private enforcement of competition law infringements in England and Wales by:

• Enabling the CAT to hear stand-alone actions (as well as follow-on actions) pursuant to section 47A of the Competition Act 1998 (Competition Act);
• Enabling the High Court to transfer proceedings to the CAT; and
• Initiating a fast-track procedure for qualifying claims.

In the first 15 months of the new regime, there has been a significant amount of activity: the CAT has initiated the fast-track procedure in respect of three claims, a number of stand-alone damages claims have already been issued in the CAT, and the High Court has transferred two claims to the CAT.

Fast-track procedure

The fast-track procedure seeks to allow less complex claims to be resolved quickly and at lower cost, particularly (although not exclusively) where the claimant is a small or medium-sized enterprise. The CAT may allocate a case to the fast-track procedure of its own initiative or on the application of a party. Rule 58(3) of the CAT Rules 2015 provides a non-exhaustive list of matters the CAT will take into account when deciding whether a claim is suitable for fast-track procedures:

• Whether one or more of the parties is an individual or a micro, small or medium-sized enterprise;
• Whether the time estimate for the substantive hearing is three days or less;
• The complexity and novelty of the issues;
• Whether additional claims have or will be made in accordance with rule 39 (i.e. a counterclaim, a claim for contribution, indemnity or another remedy and/or an additional claim against a third party);
• The number of witnesses involved (including expert witnesses, if any);
• The scale and nature of the documentary evidence involved;
• Whether any disclosure is required and, if so, the likely extent of such disclosure; and
• The nature of the remedy being sought and the amount of any damages claim.

Claims allocated to the fast-track procedure must be heard within six months of allocation and will be subject to a cap on recoverable costs at a level determined by the CAT. To date, each of the three cases allocated to the fast-track procedure has involved stand-alone claims of an abuse of a dominant position.[2]

Not all applications to be allocated to the fact track have been successful however, with indications that a follow-on damages actions (in the sense that it follows-on from enforcement action by a regulator) may only be suitable for fast-track procedures in exceptional circumstances. The CAT dismissed an application for allocation for the first time in Breasley Pillows v Vita Cellular Form – which arose out of the European Commission’s finding that four major producers of flexible polyurethane foam had participated in a cartel from October 2005 until July 2010. In dismissing the application, the CAT reasoned that the proceedings were not suitable for fast-tracking on the basis of the wide range of factual issues that pertained, the likelihood that the trial would exceed the three-day hearing guideline, the scale and scope of the disclosure sought by the parties, and the lack of urgency of the claim.

Noting the CAT’s Guide to Proceedings, Mr Justice Roth (President of the CAT) suggested that a competition damages action must be a clear-cut candidate for a fast-track procedure to qualify. He also stated that, in rare instances, follow-on actions could qualify where:

• The claimants were direct purchasers from cartelists and also the end consumer, so no question of pass-through arises;
• The competition authority has gone some way to quantify the effect of the cartel on prices in its decision in a manner that would effectively bind the CAT in a damages action; or
• The claimants have circumscribed their claim to the overcharge by cartelists in the cartel period itself.

Other developments – transfers from High Court to CAT

Under the Section 16 Enterprise Act 2002 Regulations 2015 (Regulations), the High Court can transfer proceedings which involve an infringement issue relating to Chapters I or II of the Competition Act or Articles 101 or 102 of the Treaty on the Functioning of the European Union (TFEU) to the CAT for its determination.

 Two proceedings have been transferred to the CAT to date:

1. On 30 November 2015, the High Court made its first transfer to the CAT in Sainsbury’s Supermarkets v MasterCard, deeming a transfer appropriate because of the CAT’s expanded jurisdiction, the introduction of the Regulations, the specialist expertise of the CAT panel, and the economic complexity of the issues in the case. In July 2016, the CAT – in its first major interchange fee decision – found that MasterCard’s UK multilateral interchange fee infringed Article 101(1) of the TFEU and awarded damages of approximately £68.6 million.
2. In July 2016, the High Court transferred to the CAT the competition issues arising in Agents’ Mutual Limited v Gascoigne Halman and Agents’ Mutual Limited v Moginie James Limited, both of which are stand-alone claims in which the claimant is alleging an infringement of Chapter I of the Competition Act along with breach of contract (which elements will remain in the High Court). The CAT trial is due to commence in February 2017. 

Conversely, the High Court rejected an application by Samsung for transfer in Unwired Planet International v Huawei Technologies, given the centrality of issues of telecommunications patents and patent licencing.

Future trends

To date, the measures introduced by the Consumer Rights Act have been effective in enhancing the CAT’s role in the private enforcement of competition law infringements, a trend which is likely to continue over time.

Furthermore, the fast-track procedure is emerging as an appealing option for aggrieved parties to obtain quick and direct recourse for competition law infringements – as opposed to making a complaint to the Competition and Markets Authority (CMA), which exercises administrative discretion and often involves lengthily investigations.

While the EU is currently seeking to simplify and harmonise rules across the EU for private competition damages actions arising from infringements of Articles 101 and 102 of the TFEU,[3] post-Brexit uncertainty remains as to potential future developments to the UK’s competition regime.

Read about these developments in more depth in this article by our London colleagues Sarah Turnbull and Sarah Persky.

 

By Isabella Wong and Peta Stevenson.

[1] Central Practice Note: National Court Framework and Case Management (CPN-1).

[2] NCRQ Ltd v Institution of Occupational Safety & Health; Shahid Latif and Mohammed Abdul Waheed v Tesco; Socrates Training Limited v The Law Society of England and Wales.

[3] See EU Directive 2014/104 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and the EU.