Businesses able to recover losses under new opt-out collective actions competition law regime, says BIS

The Department for Business, Innovation and Skills (BIS) has announced that it will press ahead with proposals for a new "limited opt-out collective actions regime" despite opposition from a leading UK business body. BIS had consulted on the plans last year.

"Breaches of competition law, such as price-fixing, often involve very large numbers of people each losing a small amount, meaning it is not cost-effective for any individual to bring a case to court," BIS said in its consultation response paper (72-page / 702KB PDF). "Allowing actions to be brought collectively would overcome this problem, allowing consumers and businesses to get back the money that is rightfully theirs – as well as acting as a further deterrent to anyone thinking of breaking the law."

The new 'opt-out' scheme would apply only to UK-based businesses or consumers, although "non-UK claimants" could opt-in to any claims, BIS said. It said that the scheme would have other "strong safeguards" to prevent "frivolous or unmeritorious" claims from being brought against businesses.

The Competition Appeal Tribunal (CAT), which BIS said would be given the power to "hear stand-alone cases and grant injunctions" and which could also rule on "simpler" cases through a new "fast-track" procedure under the reforms, would be required to decide whether collective actions could be brought on an opt-out basis or whether claims could only be brought on an opt-in basis instead.

In addition, claims would only be able to be heard following "judicial certification" of the merits of individual cases and an "assessment of the adequacy of the representative". It would also have to be proven that bringing a collective action was the "best way of bringing the case", BIS said.

Other safeguards would prohibit the award of treble or exemplary damages against firms that are found to have infringed the competition rules, whilst any settlement reached under the opt-out scheme would require judicial approval. Businesses and consumers that lose cases that they bring under the collective action regime would also be liable for the costs and expenses of the companies they had accused of engaging in anti-competitive behaviour.

The Government said that it would "strongly encourage" those involved in collective action disputes to resolve issues through alternative dispute resolution (ADR) systems, but said it would not make the use of ADR schemes mandatory.

"The Government is not making ADR mandatory as it would be too restrictive for ADR to be prescribed as a default route before collective actions can be undertaken and could also undermine the basic right of parties to take matters to court," BIS said.

The Confederation of British Industry (CBI) said the Government's plan to enable opt-out collective actions would "fuel a litigation culture in the UK".

"The Government has let the litigation genie out of the bottle by adopting US-style collective actions," Katja Hall, the CBI's chief policy director, said in a statement. "By grouping potential claimants together indiscriminately these ‘opt-out’ actions fail the growth test and will fuel a litigation culture in the UK. It is absolutely right that victims of competition law breaches are properly and swiftly compensated but there are better ways to do this than resorting to litigation, like using alternative dispute resolution."

However, Business Secretary Vince Cable said that there was a need to form a "legal framework that will empower individual consumers and businesses to represent their own interests".

"These are significant reforms that will dramatically increase the ability of business and consumers to hold to account those who have breached competition law," Cable said. "Their implementation will significantly enhance the benefits of the competition regime to our economy, driving improvements for both business and consumers."