Let the CAT Out of the Bag
In the realm of class actions, the US has long been the dominant jurisdiction, boasting robust procedural rules and an extensive body of precedent. By contrast, while the UK offers three forms of class action, they have rarely been used historically and are supported by much less established case law. This landscape is beginning to shift as one of these mechanisms, collective action in the Competition Appeal Tribunal (CAT), has seen a substantial rise of cases recently. In December 2024, the CAT delivered its landmark decision in Le Patourel v BT, the first-ever collective action to proceed to trial. Despite this milestone, the claim was ultimately dismissed. What does this mean for the broader trajectory of collective proceedings in the UK? Are its ambitions of evolving into a more robust avenue for mass claims thwarted before they even have a chance to take hold?
Collective actions in the UK are rooted in the Competition Act 1998,[1] which has been subject to significant changes by the introduction of the Consumer Rights Act (CRA) 2015.[2] Prior to that, the UK lacked a US-style class action regime, with cases operating strictly on an “opt-in” basis. It requires eligible class members to actively participate in the claim, making class actions difficult to bring in practice, as it is challenging to gather a sufficient number of claimants. The CRA addressed this issue by introducing the possibility of “opt-out” proceedings, allowing a proposed class representative (PCR) to initiate an action on behalf of a defined group of claimants without requiring the identification of each individual or the specification of their losses.[3] Individuals falling within the class are automatically included unless they explicitly choose to opt out, enhancing the feasibility of collective redress. However, this new regime is restricted to claims arising under competition law. Its limited scope is presumably driven by Parliament’s concerns over creating excessive uncertainty for businesses, while also aiming to balance the need for access to justice for individuals harmed by anti-competitive behaviour. Such breaches often impact a wide group of people who would otherwise lack the resources or incentives to pursue individual proceedings.
Janith Aranze, "Visa, Mastercard, Merricks draw battle lines in UK interchange fee trial" (Global Competition Review, 2024) <https://globalcompetitionreview.com/article/visa-mastercard-merricks-draw-battle-lines-in-uk-interchange-fee-trial>
Despite its introduction in 2015, the regime saw limited adoption initially, with its popularity only beginning to grow in the recent few years. This is due to the hurdle of certification before the merits of a collective action can be formally assessed. To guard against weak unfounded claims, the CAT will conduct a preliminary review of the application before issuing a Collective Proceedings Order (CPO), which authorises the PCR to bring the action. This gatekeeping function of the CAT originally posed a significant challenge for claimants, until the seminal case of Merricks v Mastercard provided much needed clarity for the test of certification.[4] Within, Merricks sought to challenge Visa and Mastercard for imposing unfairly high interchange fees on transactions by virtue of their dominance over debit and credit card payments. While the CPO application was initially rejected by the CAT due to its strict interpretation to the test, this position was overturned by the Court of Appeal and later the Supreme Court, both of which adopted a more favourable approach towards the claimants. In emphasising that collective proceedings should not face procedural restrictions greater than those faced by individual claimants, the courts took a high-level approach to assessing how damages are to be calculated. Merricks also clarifies that certification does not involve a definitive merits-based assessment, as long as the claim has “some basis in fact”.
The liberal and purposive attitude taken by the Supreme Court has opened the floodgates and incentivised more cases to be launched.[5] The CAT has modified its approach to certification and adopted a lower threshold. In just two years after the Merricks ruling, more than twenty applications have been brought, with nine of those certified and only three refused but subject to appeal.[6] Moreover, claimants tend to get another shot at retaking this certification test. In cases such as Gormsen v Meta, Gutmann v Apple, and many others, the CAT has declined to grant certification but has not definitively struck them out, allowing PCRs to refine the formulation of their claims and resubmit their applications.[7] This evolving framework signals the CAT’s willingness to facilitate collective redress, providing claimants with a pathway to trial and to accessing justice.
But does the current approach strike the right balance between compensating consumers and ensuring that unmeritorious claims are filtered out at an early stage? It could be argued that allowing second chances at certification accords too much leniency to claimants who fail to properly prepare their application initially, at the expense of prolonging uncertainty for defendants. CPO applications are costly and time-consuming, especially where billions of a company’s assets are at stake due to the mass nature of the proceedings. Nevertheless, the Court of Appeal in Evans v Barclays stressed that the regime is grounded in the principle of ensuring that wrongdoers do not avoid the consequences of their illegal actions. It rejected the argument that this radical approach unfairly burdened or oppressed defendants, since applying the regime too strictly would undermine its policy objective.[8]
Michael Cross, "BT landline group claim opens in CAT" (Global Competition Review, 2024) <https://www.lawgazette.co.uk/news/bt-landline-group-claim-opens-in-cat/5118571.article>
Moreover, success at the certification stage does not necessarily equate to success on the merits, as highlighted by the recent judgment in Le Patourel v BT. The excessive pricing claim was grounded in Ofcom’s 2017 provisional findings, which flagged concerns over BT’s pricing for standalone fixed voice services. The CAT ultimately dismissed the claim, concluding that the prices were excessive but not unfair.[9] This outcome may deter certain claims at the margins on the merits, given the cost-intensive nature of collective proceedings. Yet this is unlikely to significantly slow the current momentum of collective actions, as the relatively accessible stage of certification ensures that claimants still have the opportunity to bring their case forward. Each new judgment contributes to a growing body of precedent that future cases reaching substantive trial can rely upon –– Le Patourel v BT provides clarity into concepts such as “unfairness” and valuable guidance on the evidentiary threshold required for a successful claim. The case also demonstrates the regime’s broader role in promoting corporate accountability on behalf of regulators. Notably, after its initial report, Ofcom had not pursued further formal findings of abuse, nor imposed any regulatory measures beyond voluntary commitments by BT.[10] By advancing to trial, the proceedings required BT to rigorously justify its pricing practices, fostering greater transparency and scrutiny of market behaviour. The regime serves as an important check on market-dominating companies, signalling to businesses that their practices will be challenged in a credible forum. Despite the initial “failed” collective action, the framework remains conducive to enhancing market oversight generally, with future cases expected to further this objective.
What lies ahead for the future of the CPO regime then? There appears to be a growing trend of the types of cases being brought under collective action becoming increasingly diverse. For instance, actions against Thames Water for misleading its regulator Ofwat on the amount of sewage discharged,[11] and against the Performing Rights Society for unequal royalty distributions,[12] illustrate the regime’s adaptability and its growing appeal as a tool to address large-scale consumer and contractual protections beyond the realm of competition law. It is also progressively utilised against Big Tech companies, such as claims against Apple[13] and Google Play Stores[14] for onerous exclusion terms, and against Meta for profiting excessively from users’ personal data.[15] While this trend underscores the regime’s potential to address modern and large-scale harms, it also raises concerns about the risk of advancing claims with only some vague or tenuous link to competition law. Such novel and creative theories of harm arguably distort the original intent of the regime, contorting unrelated issues into competition law simply to gain access to the opt-out framework. Nevertheless, this expansion is also a response to gaps in regulatory oversight, especially as rapid technological advancements outpace traditional regulatory mechanisms. Big Tech’s dominance and the essential nature of their services readily give rise to new conducts of harm that impact millions. This concern was evident during the passage of the Digital Markets, Competition and Consumers Act (DMCCA) through Parliament, where there was debate over whether collective actions should be expanded to encompass consumer law claims.[16] Although this proposed amendment was ultimately not pursued, likely due to the uncertainty it could create for businesses, the growing variety of cases being certified under the current framework suggests that it is only a matter of time before the regime is gradually expanded to cover non-competition-related claims.
Collective actions are currently leveraged as a powerful tool by activists, consumer rights advocates, and academic experts to challenge corporate practices in areas regulators have yet to fully address. As more cases are certified and proceed to trial, the growing momentum behind collective proceedings is significantly improving access to justice on a large scale while complementing regulatory action. With the framework already adapting to novel and creative theories of harm under competition law, extending its remit to include consumer law seems to be the natural next step in ensuring that the regime reflects the evolving needs of modern markets and consumer rights.
Bibliography:
[1] Competition Act 1998
[2] Consumer Rights Act 2015
[3] Alicja Dijakiewicz-Kocon, Stephen Critchley, and Richard Pike, “Better in than out: expansion of opt-out class actions against major technology firms in the UK” [2022] 15(4) GCLR
[4] Mastercard Incorporated and others v Walter Hugh Merricks CBE [2020] UKSC 51
[5] Hausfeld, “2024 Year in Review: Collective Redress” (Hausfeld, 2024) <https://www.hausfeld.com/en-gb/what-we-think/perspectives-blogs/2024-year-in-review-collective-redress/>
[6] Hausfeld, “Collective actions - Certification in the United Kingdom two years after the Supreme Court judgment in Merricks” (Hausfeld, 2022) <https://www.hausfeld.com/en-gb/what-we-think/competition-bulletin/ecj-rules-on-temporal-applicability-of-the-cartel-damages-directive-and-clarifies-the-statute-of-limitation-in-cartel-damage-cases-1/>
[7] Flora Robertson, “Beware of the CAT” (Competition Bulletin, 2023) <https://competitionbulletin.com/2023/09/02/beware-of-the-cat/>
[8] Michael O'Higgins FX Class Representative Ltd v Evans and others [2023] EWCA Civ 876
[9] Justin Le Patourel v BT Group PLC [2024] CAT 76
[10] Stephenson Harwood, “Le Patourel v BT: Key lessons from the CAT’s landmark judgment on excessive pricing and collective actions” (Stephenson Harwood, 2024) <https://www.shlegal.com/news/le-patourel-v-bt-key-lessons-from-the-cat-s-landmark-judgment-on-excessive-pricing-and-collective-actions>
[11] Professor Carolyn Roberts v Thames Water Utilities Limited and Kemble Water Holdings Limited (1635/7/7/24)
[12] Mr David Alexander de Horne Rowntree v the Performing Right Society Limited and PRS For Music Limited (1634/7/7/24)
[13] Dr Rachael Kent v Apple Inc. and Apple Distribution International Ltd (1403/7/7/21)
[14] Elizabeth Helen Coll v Alphabet Inc and Others (1408/7/7/21)
[15] Dr Liza Lovdahl Gormsen v Meta Platforms Inc and Others (1433/7/7/22)
[16] Linklaters, “The Digital Markets, Competition and Consumers Act: what you need to know about the risk of private litigation” (Linklaters, 2024) <https://www.linklaters.com/en/insights/blogs/linkingcollectiveredress/2024/october/the-digital-markets-competition-and-consumers-act>