Private actions in competition law

1
Private actions in competition law

• Ali Nikpay, Senior Director, Office of Fair
  Trading
• The views expressed are personal and do not
  necessarily reflect those of the Office of Fair
  Trading

2
The role of private actions

• Competition law is good for business and good for
  consumers. Strong competition regimes encourage
  open, dynamic markets, and drive productivity,
  innovation and value for consumers and customers
• Anti-competitive behaviour causes significant
  harm to both business and consumers
• Hasbro/Argos/Littlewoods (40m)
• Replica Football Kit (50m)

3
The role of private actions

• To date, consumers have recovered virtually no
  compensation
• Very few judgments
• Suggests there are barriers to effective redress
  which have to be addressed
• Public enforcement cannot by itself bring about
  optimal levels of compliance need combination of
  public enforcement and private actions
• Ongoing bid-rigging cartel investigation (tenders
  worth 3bn)
• Consensus view inherent in EC Treaty/jurisprudenc
  e
• EC Green Paper
• 1999 UK White Paper

4
Objectives

• Key principles
• Reform
• Need more private actions than currently. Does
  not mean less public enforcement in fact likely
  to see more enforcement as resources better
  focused (as a result of reform of the past three
  years)
• Avoid US style litigation culture
• Right balance between public and private for
  optimal regime
• Consistency of policy/certainty
• Private must not be to the detriment of public

5
Awareness/detection/economies of scale

• Collective action key
• Currently, designated bodies have standing to
  bring follow-on representative actions before the
  CAT on behalf of named consumers
• This system may be too restrictive
• Representative actions should be more widely
  available in stand-alone cases, to bodies
  representing businesses and consumers
• Courts should have the power to give permission
  to non-designated bodies to bring a
  representative action in individual cases
• But not US-style class actions (actions brought
  about by those with direct financial interests)
• Representative bodies that do not have
  pecuniary interest in outcome clients acting in
  a quasi public interest capacity less likely to
  bring speculative unwarranted claims greater
  control over counsel

6
International elements

• In the UK, infringement decisions by UK NCAs/EU
  are binding on the courts. Decisions by other
  NCAs are not binding in the UK
• Providing for the binding effect of decisions of
  NCAs throughout the EU would achieve greater
  certainty and save costs
• Applicable law
• Minimum disclosure requirement in EU?

7
Costs and funding

• Currently percentage increase on the normal fees
  if the case is won can be no more than 100 per
  cent and is recoverable from the losing party
• Allow percentage increase of more than 100 per
  cent (but to allow only the percentage increase
  up to 100 per cent to be recoverable from the
  losing party). Any further increase would have to
  be met from the damages recovered
• Would increase incentives for lawyers to take
  cases on a conditional basis without imposing
  disproportionate burdens on defendants

8
Costs-capping orders

• Ex ante uncertainty as to the costs liability if
  the case is ultimately lost may act as a
  disincentive to bringing well-founded actions
• Currently courts have a wide discretion as to
  costs but this discretion is exercised only ex
  post
• A solution may be a more frequent use of
  costs-capping orders whereby the claimants
  liability in costs is capped ex ante

9
Checks and balances to prevent excess

• Policy outline above designed to avoid US style
  litigation culture
• But also note there are key differences between
  US and UK
• A frequent criticism of the US system is that
  incentives and rules are distorted in favour of
  claimants and against defendants, giving rise to
  speculative claims that the defendant is forced
  to settle
• Courts in England and Wales already have strong
  case management powers and are well-equipped to
  deal with ill-founded cases, for instance by
  striking them out at an early stage

10
Checks and balances to prevent excess

• In the UK representative action model, only
  reputable and established bodies can bring an
  action on behalf of consumers and businesses. In
  the class action, a member of the class can bring
  an action on behalf of the entire class
• In the UK, there is no (right to) jury trial in
  damages cases
• In the UK, damages are compensatory. No treble
  damages

11
Checks and balances to prevent excess

• In the US, if the claimant loses, he is not
  liable for the other partys costs but if he
  wins, he is entitled to reasonable attorneys
  fees. Here, the basic principle is that costs
  follow the event
• In the US, class action attorneys often work on a
  contingency fee basis, that is, if the case is
  won, they are entitled to a share of the damages.
  In England and Wales, contingency fees in
  contentious matters are against public policy
• Disclosure in England and Wales is more limited
  than US discovery (no depositions or
  interrogatories)

12
Optimising the balance of public enforcement and
private actions

• With a greater number of private actions, the
  need to ensure a consistent application of
  competition policy in the UK is likely to
  increase
• A key issue is how courts considering private
  competition law actions take into account the
  evolution of competition policy, including the
  decisions of, and guidelines produced by, the OFT
• Courts should be required to 'have regard' to UK
  NCAs' decisions and guidelines when determining
  CA98 issues
• Natural extension of s.60
• s.60 not about primacy of EC law
• Applies to Chapter I and Chapter II prohibition,
  that is, even where there is no effect on trade
  between Member States
• OFTs main focus must remain public enforcement
  but greater intervention is likely

13
Protecting public enforcement

• Greater level of private actions not at expense
  of public enforcement
• Leniency leniency programme essential tool. If
  undertakings are discouraged from applying for
  leniency due to the risk of private actions, it
  is likely that a smaller proportion of cartels
  will be uncovered
• We consider that two guiding principles should be
  observed
• when defending a damages claim, a leniency
  recipient (that is, an undertaking which has been
  granted leniency by the European Commission, the
  OFT or any other NCA in the EU) should, as far as
  possible, be in the same position as it would
  have been if it had not applied for leniency, and
• those who have suffered loss should not find it
  more difficult to obtain redress because one or
  more of the infringing undertakings has been
  granted leniency

14
Leniency specific issues and options

• Leniency documents (that is, any documents
  created for inclusion in or to support an
  undertaking's leniency application) should not be
  used in court against the leniency recipient
• Should the immunity recipient benefit from
  removal of joint and several liability?
• Or should the immunity recipient be able to
  recover contributions of up to 100 per cent from
  non leniency recipients on a modified basis?

15
Disclosure

• Not appropriate to shift the burden of private
  actions to OFT, for instance through requests for
  disclosure or intervention in support of one
  party
• Even in follow-on actions, OFT should act
  impartially and would not act in support of one
  partys case
• Private actions must not divert resources from
  public enforcement

16
Next steps

• We look forward to a stimulating debate
• We will hold a hearing in September to discuss
  the issues put forward in the consultation
• We will continue working closely with DG Comp
• Much can be done at domestic level and, based on
  the outcome of the consultation, we will make
  recommendations to the Government and take action
  ourselves, within the limits of the legal
  framework in which we operate, to address
  barriers to private actions and facilitate
  well-founded competition claims