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As part of its decision to make a Collective Proceedings Order (CPO) certifying the power cables collective proceedings, the Competition Appeal Tribunal (CAT) has adopted a renewed focus on seeking to ensure that class members can benefit from collective proceedings brought on their behalf. The Tribunal allowed the proceedings to move forward for now, but gave a strong indication that (in this case and from now onwards) it will take a much tougher line on the adequacy of distribution plans.
In its judgment, the Tribunal also insisted on tightening-up the class representative’s class definition and gave guidance on what litigation budgets needed to include.
There is more detail below on each of the key points in the CAT’s decision.
The Tribunal has approved the opt-out CPO application brought by Clare Spottiswoode. The claim follows on from the European Commission’s finding that 11 producers of underground and submarine high voltage power cables had infringed competition law from 1999 to 2009. The proposed class representative applied to bring opt-out proceedings on behalf of everyone who bore the cost of paying for domestic consumption of electricity supplied via the British distribution network. The central allegation was that the overcharge in power cable prices caused by the cartel was ultimately passed-on to consumers in the form of higher electricity bills.
The proposed class representative (PCR) estimated the class size to have been more than 30 million.
The Tribunal raised the issue of distribution of its own initiative. It identified that there may be particular challenges to effective distribution in the present case, given the vast size of the class and the potential for individual consumers to have difficulty recalling what electricity bills they paid over a 20-year period. It also recognised that individual consumers may consider the amounts receivable as so small that they would not be incentivised to engage in the distribution process.
The CAT accepted that it would be unattractive for tens of millions of pounds of legal and funders’ fees, and lots of Tribunal time, to be spent on complicated proceedings that only a few consumers would benefit from. “If that were the outcome”, it added, “it might fairly be said that the litigation has benefitted no-one but the lawyers and funders.” In doing so, the Tribunal referred back to previous decisions where it had held that it was relevant to consider whether collective proceedings would likely benefit lawyers and funders as opposed to members of the class (see our previous articles on Boundary Fares and Qualcomm).
The CAT saw a possible solution to this problem in comments previously made by the Court of Appeal which had emphasised the CAT’s ability to find creative ways of distributing funds (see our previous articles on the Boundary Fares Court of Appeal and Le Patourel Court of Appeal decisions). It suggested that it may be appropriate for distribution to be made by credits to customers’ electricity bills. Whilst the proposed class representative wished to leave this question until after damages were available, the CAT said that it would not leave the issue until then because it went to the fundamental question of whether the proceedings offered a real benefit to class members.
However, the Tribunal has given the class representative an opportunity to power through for now. Whilst it said that the lack of a developed distribution plan did not prevent certification, the CAT did order the class representative to give detailed consideration to its distribution plan now and report back within 3 months. The Tribunal threatened that, if the proposal did not adequately address its concerns, one option for it would be decertifying the collective proceedings.
The defendant raised objections to the class definition proposed in the CPO application. The main issue was that the proposed definition included all persons who “bore” the cost of electricity bills in the relevant period. This was intended to include household members who contributed to the costs of the electricity bills as part of their domestic arrangements.
The CAT referred to its decision in Interchange which had said that class definitions needed to be capable, on their face, of sensibly identifying a class (see previous blog post). It held that the definition was unsatisfactory on this basis because it would require household members to analyse their financial arrangements to determine who had borne the cost of an electricity bill, and it would be difficult to evidence. Accordingly, the Tribunal replaced the definition with one limited to those who had directly paid for electricity bills.
The Tribunal dismissed another objection raised by the defendants, that the class definition potentially included individuals under 18 years old in England and Wales and under 16 years old in Scotland. This was on the basis that almost all class members will have reached the relevant age by the opt-out deadline, and those who had not done so could seek permission to opt-out.
The defendants submitted that the budget put forward by the PCR was less detailed than those in previous CPO certification cases. The CAT remarked that a proposed class representative’s litigation budget has the functions of allowing the Tribunal to:
The CAT held that it would be helpful for it to understand details of assumptions made for each stage of proceedings and for it to have a breakdown of costs stage-by-stage. Further details should also be included of how disclosure and transaction costs had been computed (to assist the Tribunal in making case management decisions in future by allowing a comparison with the budget assumptions). However, the Tribunal considered that the budget did not need to include the advisors’ charging rates.
The most significant part of this judgment is that the CAT has set a clear marker in seeking to ensure that collective proceedings are conducted for the benefit of class members, an issue which has recently been brought firmly into focus in a settlement in the Boundary Fares collective proceedings. It is clear that the CAT will now be sensitive to that point in future cases.
Other aspects of the decision show the Tribunal’s certification process continuing to develop and mature. As well as the important decisions which it reached on class definition and litigation budgets, the CAT also dismissed the defendants’ submission that the PCR’s litigation funding agreement was an unenforceable damages based agreement following the reasoning in the Supreme Court’s decision in PACCAR (see previous blog post). It reached all these decisions in fewer than 24 pages, which reflects ongoing development and refinement of CPO jurisprudence.