UK Supreme Court gives important judgment on “opt-out” competition class actions

The Supreme Court has today handed down an important decision on the ‘class certification’ procedure under the regime for opt-out competition collective actions that was introduced in the UK in 2015.

The handing down of the judgment was postponed by one week following the untimely death of Lord Kerr, who presided over this case. A touching tribute was made to Lord Kerr at the handing down of the judgment.

The other four justices who heard the appeal were evenly divided as to whether the decision of the Competition Appeal Tribunal (CAT) in 2017 not to certify an application for a ‘collective proceedings order’ by Mr Walter Merricks CBE was lawful.

Those four justices nevertheless agreed that, because Lord Kerr was recorded in a draft judgment circulated to the parties’ advisers as agreeing that the CAT’s decision was unlawful, that should be the outcome of the appeal rather than a re-hearing by a new Supreme Court panel.

Given this split reasoning but not result, the ratio decidendi of the Supreme Court decision, both for the purpose of the remittal to the CAT in this case and any other pending or future certification applications before the CAT, remains unclear, as discussed further below.

Aggregate damages and distribution

The Supreme Court decision addresses the two specific reasons given by the CAT in 2017 for refusing certification of Mr Merricks’ proposed class, which covered more than 46 million consumers across all sectors of the UK economy over a 16-year period ending over a decade ago.

In relation to the first reason given by the CAT – that sufficient data would not be available for an ‘aggregate’ award of damages – Lord Briggs and Lord Thomas have found that the CAT should have ‘done what it could’ with the available evidence, and should have conducted a ‘relative’ assessment of whether an aggregate award of damages was more suitable than individual awards of damages.

However, on the same issue, Lord Sales and Lord Leggatt have found that the CAT was entitled to refuse certification of such a ‘gargantuan’ proposed class where there was no realistic prospect of the proposed economic methodology being applied across the whole width, or substantially the whole width, of the proposed class.

In relation to the second reason given by the CAT – that Mr Merricks’ proposed method of distributing any damages to individual class members would not bear any relationship to their actual losses – the four justices have agreed that the CAT should not have required any relationship – however weak – between distribution and individual compensation.  Lord Sales and Lord Leggatt nevertheless considered that the first reason given by the CAT was  sufficient for it to refuse certification.

Broader context and looking ahead

Beyond aggregate damages and distribution, the Supreme Court has provided guidance on other issues – such as the certification procedure and the determination of common issues – that may be of broader assistance to the parties in this and other cases under the 2015 regime. 

The CAT will now proceed to determine the certification applications in a number of proposed collective actions that have been stayed pending this judgment, in addition to reconsidering certification in the Merricks case. Those further certification hearings will likely take place during the course of a busy 2021 for the CAT, and will be critical to the continued development of the nascent opt-out competition class actions regime in the UK.

Today’s judgment also comes at a time of rapid development of the broader group and mass claims landscape in the UK and around Europe, including as regards group litigation orders (GLOs) and representative actions in the UK. Further developments in the opt-out competition class actions regime in light of today’s judgment will continue to form an important part of that broader mass claims landscape, and should therefore be watched carefully by all companies potentially exposed to such litigation, including outside the competition sphere.

Freshfields acts for Mastercard in these proceedings.  The team is led by partners Mark Sansom and Nick Frey and counsel Ricky Versteeg. The associate team includes Ingrid Rois, Natalie Puddicombe and Alexandra Holroyd.