CAT power to issue cost-capped injunctions will improve competition law enforcement, says expert

Out-Law Analysis | 23 Jan 2015 | 12:55 pm | 2 min. read

FOCUS: Proposed changes to the workings of the Competition Appeals Tribunal (CAT) will make it more likely that competition law is enforced and will give some smaller companies a boost in pursuing competition claims.

The government has proposed that the CAT be given the power to issue injunctions which would stop companies acting in a certain way while a case is being pursued. It is intended that the CAT will also get the power to cap or waive entirely the amount of money that the company seeking the injunction has to put aside as compensation if it turns out that the injunction was wrongly granted, known as a 'cross-undertaking as to damages' or 'cross-undertaking'.

Currently, only the High Court can issue injunctions in competition cases, and cross-undertakings will generally be ordered as a matter of course.

The Consumer Rights Bill, which will come into force in October 2015, contains the proposed changes. Once in force, it will be up to the CAT to decide whether to implement rules which allow the cap or waiver of the cross-undertaking.  If implemented, this power will only be exercisable for cases allowed to use a new 'fast-track' procedure.

Injunctions are useful in immediately stopping activity that the applicant claims is in breach of competition law and which the applicant alleges would cause the applicant harm if it were to be allowed to continue throughout the course of the main dispute.

The notion of a cap on, or waiver of, cross-undertakings will be likely to be of significant interest for SMEs. Many smaller companies will have held back from seeking injunctions because it would almost certainly involve setting aside substantial funds at the outset of the case, which can be a considerable strain on a company's finances. Without this financial burden, such companies are likely to be more willing to seek injunctions.  

But will this lead to large numbers of vexatious, speculative injunction applications capitalising on the fact that cross-undertakings might no longer be the norm? Probably not. The CAT will still have to apply the same test as that applied by the High Court in deciding whether or not to grant an injunction – ie there must be a serious issue to be tried, damages must not be an adequate remedy, and the 'balance of convenience' must lie in favour of granting the injunction. Additionally, making the injunction application is itself very demanding, requiring significant work and full disclosure of all relevant information.

The precise practical implications are hard to pinpoint until we know how the CAT will decide which cases can use the fast-track procedure, which allows for caps and waivers, and which cases can't.

The CAT has acknowledged that hardly any competition claims are 'simple'.  So a fast-track claim doesn't necessarily need to be a 'simple' case, in terms of the legal issues, as long as it is manageable in terms of costs, overall length of trial, and number of witnesses needed.

The CAT has also said that the fast-track procedure might be modelled so as to offer only limited forms of relief, such as injunctions or declarations. This could potentially encourage applicants to streamline their claims so as to bring them within scope. The CAT has also said that the fast-track procedure may not always be suitable for companies with limited financial resources, as sometimes the intensive work required to prepare claims in short periods is more expensive than preparing them over longer periods.

Though the exact implications will not be known until the precise details of the rules are confirmed, it is clear that making it easier and more affordable for smaller companies to seek injunctions will improve the enforcement of competition law. In cases where the Competition and Markets Authority is not inclined to investigate, there are now more tools to encourage private litigants to bring private actions which will act as a further deterrent to potential competition law infringers.

Ben Lasserson and Elizabeth Hersey are competition litigation experts at Pinsent Masons, the law firm behind Out-Law.com