Increased clarity is expected to influence private enforcement actions in 2021

Collective damages claims in the EU and the UK

Collective actions are likely to grow in importance over the next 12 months. The end of 2020 saw the first opt-out competition damages claim brought in the Portuguese courts: a claim on behalf of all Portuguese consumers for losses allegedly resulting from Mastercard’s card interchange fees.

This and other similar collective claims across the EU are likely to gain further inspiration from the EU’s Representative Actions Directive that will harmonise national rules on collective consumer redress – introducing such procedures for the first time in some Member States. The Directive will require each Member State to implement a procedure for collective proceedings that will allow designated consumer protection or public bodies to apply, on behalf of consumers, for injunctions and/or damages for infringements of consumer protection laws before national courts. While the long list of EU legislation for which collective claims can be brought under the Directive does not include the EU competition rules, the new arrangements introduced by the Directive, and the evolution of a collective claims culture, are likely to prompt collective proceedings for competition claims too. The proliferation of claims in the courts of Member States such as Portugal, that have historically seen fewer large claims than the “big 3” of Germany, the Netherlands and the UK, is also a distinct trend. [Bird & Bird advised on the largest-ever award of damages for a competition infringement in the Spanish courts in 2020, emphasising the EU-wide expansion of private enforcement.]

Similarly in the context of collective claims for losses resulting from competition law infringements, the landmark judgment of the UK Supreme Court in Merricks v. Mastercard is expected to have a significant impact on collective actions, not only in the UK but also further afield. The Supreme Court found that the Competition Appeal Tribunal (CAT) had incorrectly rejected an application for certification to bring collective proceedings (i.e., confirmation of whether a case is eligible for a collective action). The judgment sets out important clarifications on the framework to be applied by the CAT when certifying such proceedings, and indicates that the requirements should be applied more flexibly, creating a more-consumer friendly landscape for these group-actions. The Merricks claim is of interest outside the UK because it highlights a number of the practical difficulties raised by collective claims, wherever they are brought.

In 2016, Mr Merricks brought a collective claim against Mastercard on behalf of a class of some 46 million consumers, in a claim stated to be worth some £ 14 billion, for losses resulting from the multilateral interchange fee arrangements. Under the collective proceedings rules, the Competition Appeal Tribunal was required to consider whether to certify the claim. It refused to issue a collective proceedings order, on the grounds that the claim was not “suitable” for collective proceedings, for two reasons.

i. The CAT considered that Mr Merricks had not provided sufficient evidence of a sound methodology for calculating damages (and in particular for calculating how losses were passed on to each consumer by the relevant retailers); and

ii. The CAT considered that distribution of damages to members of the class on the proposed per capita basis did not take account of individual spending habits and therefore of the loss suffered by each individual consumer, and therefore any damages would not be “compensatory”.

The Court of Appeal overturned this judgment. It held that the CAT had set too high a standard at the certification stage, effectively conducting a “mini-trial” of the merits. The class representative could not be expected to specify in detail at the certification stage what evidence would be available. This would be provided at a later stage. The Court of Appeal also considered that the CAT was wrong to reject the proposed distribution method at the certification stage.

The Supreme Court agreed with the Court of Appeal. It considered that the normal compensatory approach to individual claims was inappropriate for collective actions, as compensatory principles had been modified by the regime. The only requirement was that the distribution should be “just in the sense of being fair and reasonable”. Furthermore, a claimant should not be deprived of a trial “merely because of forensic difficulties in quantifying damages”, as there were a number of circumstances where damages could not be easily calculated using scientific analysis alone. The CAT had also failed to consider whether individual proceedings were a relevant alternative to collective proceedings, which they were not, and whether the same difficulties on quantification would affect an individual claimant.

A relevant factor in assessing whether the claim is suitable for certification as a collective claim is proportionality - where there are consumers who have claims worth a few hundred or a few thousand pounds then it would not be proportionate to bring those claims individually and collective proceedings may be more suitable.

The Supreme Court also found that the CAT had made an error of law in determining that the pass-on issue was not common to all the claims. If the CAT had reached the correct conclusion, this would have meant that both the main issues were common issues, which would have been a powerful factor in favour of certification. The Supreme Court recognised that there was no requirement that all the significant issues in the claim should be common issues, but clearly if the common issues are limited in scope or significance this will be a factor that points against certification. The judgment is expected to unlock claims in a number of other sectors that have been on hold pending the outcome.

Procedural issues

Away from the field of collective proceedings, procedural issues continue to be important, giving rise to references to the European court. An interesting judgment of the European Court in November 2020, in Case C-59/19 Wikingerhof v. Booking.com, confirmed that even if there is a contract between the parties, if the alleged unlawfulness giving rise to an infringement of the competition rules arises from an allegedly tortious act (in this case an abuse of Booking.com’s dominant position) it is not necessary to interpret the contract in order to assess the alleged unlawfulness. In these circumstances, the rules governing jurisdiction of the claim are those applicable to tortious disputes, meaning in this case that the claimant, a German hotel, could claim in the German courts rather than in the courts of the Netherlands where Booking.com was established.

With significant procedural differences between Member States continuing to exist, choice of forum will continue to be important in 2021, questions such as those arising in the Wikingerhof case will have an impact on the litigation and further references to the European Court in the field of jurisdiction seem inevitable.

However, as national and European Court judgments on this issue multiply, some certainty is starting to develop and it is likely that some of the focus will shift to another emerging issue, namely the question of governing law, i.e. which national law determines key procedural issues such as limitation periods, evidence, etc. This is proving to be particularly important in claims arising from large cross-border infringements, e.g. global or Europe-wide cartels, where the claim is brought in one Member State, but covers infringements committed, and losses arising, in numerous other member States and non-Member States.

Limitation periods

A further issue that seems likely to come before the courts in 2021 is the question of limitation periods. The Competition Damages Directive 2014/104 established a 5-year limitation period, with quite complex rules governing the start of the period, and the circumstances under which the 5-year clock will be stopped. The new rules do not have retroactive effect.

In its March 2019 judgment in Case C-637/17 Cogeco v. Sport TV, the European Court of Justice held that while the provisions of the Directive on limitation periods did not apply to the case at hand, a claim for damages for losses resulting from an alleged abuse of a dominant position in relation to the supply of premium TV sports channels, the Portuguese three-year limitation period that applied prior to the entry into force of the Directive was not compatible with the principle of effectiveness. However, in November 2020, the Lisbon Court of Appeal held that the ECJ ruling did not apply to the case before it, because the ECJ had failed to take into account the fact that the claimant could have interrupted the limitation period by starting proceedings. The very short pre-Directive limitation periods in some Member States remain an obstacle to effective damages claims.

While the question of the duration of limitation periods is likely to diminish in importance as more time passes after the implementation date of the Competition Damages Directive, it seems likely that further references to Luxembourg will be needed in order to clarify the details around limitation periods, including the necessary level of knowledge required to trigger the start of a limitation period and what circumstances validly interrupt limitation periods. The Court of Justice is due to rule on the important question about the retroactive effect of the rules on limitation set out in the Directive in case C- 267/20 Volvo and DAF v. RM, referred by the Spanish courts.

It will be seen that a number of the issues currently arising in competition damages claims are procedural. To some extent this is an inevitable consequence of the scale of some of these competition damages claims. Preliminary skirmishes on procedural issues shape the litigation and allow the parties to estimate better the risks and the likely outcome, leading to settlement which remains the result of most competition damages claims. However, with a greater volume of competition damages claims being brought, it is likely that the courts will increasingly be called upon to rule on substantive issues such as the quantification of loss and passing-on, at which point references to the Luxembourg court also seem likely to increase, ultimately leading to greater certainty in this area.

Brexit remarks

For UK readers in particular, the end of the Brexit transition period will be a further major development in 2021. It will probably be too early to see any substantive departures from EU competition law, although the emergence of parallel enforcement by the UK competition authorities is likely to lead to the parallel development of private claims. Possibly the only certainty in private enforcement is that 2021 will be at least as eventful as 2020.