1. Private actions in competition law Ali Nikpay, Senior Director, Office of Fair Trading The views expressed are personal and do not necessarily reflect those of the Office of Fair Trading

2. The role of private actions ● Competition law is good for business and good for consumers. Strong competition regimes encourage open, dynamic markets, and drive productivity, innovation and value for consumers and customers ● Anti-competitive behaviour causes significant harm to both business and consumers  Hasbro/Argos/Littlewoods (£40m)  Replica Football Kit (£50m)

3. The role of private actions ● To date, consumers have recovered virtually no compensation ● Very few judgments ● Suggests there are barriers to effective redress which have to be addressed ● Public enforcement cannot by itself bring about optimal levels of compliance; need combination of public enforcement and private actions ● Ongoing bid-rigging cartel investigation (tenders worth £3bn) ● Consensus view: inherent in EC Treaty/jurisprudence  EC Green Paper  1999 UK White Paper

4. Objectives ● Key principles ● Reform  Need more private actions than currently. Does not mean less public enforcement – in fact likely to see more enforcement as resources better focused (as a result of reform of the past three years) ● Avoid US style litigation culture ● Right balance between public and private for optimal regime ● Consistency of policy/certainty ● Private must not be to the detriment of public

5. Awareness/detection/economies of scale ● Collective action key ● Currently, designated bodies have standing to bring follow-on representative actions before the CAT on behalf of named consumers ● This system may be too restrictive ● Representative actions should be more widely available in stand-alone cases, to bodies representing businesses and consumers ● Courts should have the power to give permission to non-designated bodies to bring a representative action in individual cases ● But not US-style class actions (actions brought about by those with direct financial interests) ● “Representative” bodies that do not have pecuniary interest in outcome; clients acting in a quasi public interest capacity; less likely to bring speculative unwarranted claims; greater control over counsel

6. International elements ● In the UK, infringement decisions by UK NCAs/EU are binding on the courts. Decisions by other NCAs are not binding in the UK ● Providing for the binding effect of decisions of NCAs throughout the EU would achieve greater certainty and save costs ● Applicable law ● Minimum disclosure requirement in EU?

7. Costs and funding ● Currently percentage increase on the normal fees if the case is won can be no more than 100 per cent and is recoverable from the losing party ● Allow percentage increase of more than 100 per cent (but to allow only the percentage increase up to 100 per cent to be recoverable from the losing party). Any further increase would have to be met from the damages recovered ● Would increase incentives for lawyers to take cases on a conditional basis without imposing disproportionate burdens on defendants

8. Costs-capping orders ● Ex ante uncertainty as to the costs liability if the case is ultimately lost may act as a disincentive to bringing well-founded actions ● Currently courts have a wide discretion as to costs but this discretion is exercised only ex post ● A solution may be a more frequent use of costs- capping orders whereby the claimant’s liability in costs is capped ex ante

9. Checks and balances to prevent excess ● Policy outline above designed to avoid US style litigation culture ● But also note there are key differences between US and UK ● A frequent criticism of the US system is that incentives and rules are distorted in favour of claimants and against defendants, giving rise to speculative claims that the defendant is forced to settle ● Courts in England and Wales already have strong case management powers and are well-equipped to deal with ill- founded cases, for instance by striking them out at an early stage

10. Checks and balances to prevent excess ● In the UK representative action model, only reputable and established bodies can bring an action on behalf of consumers and businesses. In the class action, a member of the class can bring an action on behalf of the entire class ● In the UK, there is no (right to) jury trial in damages cases ● In the UK, damages are compensatory. No treble damages

11. Checks and balances to prevent excess ● In the US, if the claimant loses, he is not liable for the other party’s costs but if he wins, he is entitled to reasonable attorney’s fees. Here, the basic principle is that ‘costs follow the event’ ● In the US, class action attorneys often work on a contingency fee basis, that is, if the case is won, they are entitled to a share of the damages. In England and Wales, contingency fees in contentious matters are against public policy ● Disclosure in England and Wales is more limited than US discovery (no depositions or interrogatories)

12. Optimising the balance of public enforcement and private actions ● With a greater number of private actions, the need to ensure a consistent application of competition policy in the UK is likely to increase ● A key issue is how courts considering private competition law actions take into account the evolution of competition policy, including the decisions of, and guidelines produced by, the OFT ● Courts should be required to 'have regard' to UK NCAs' decisions and guidelines when determining CA98 issues ● Natural extension of s.60  s.60 not about primacy of EC law  Applies to Chapter I and Chapter II prohibition, that is, even where there is no effect on trade between Member States ● OFT’s main focus must remain public enforcement but greater intervention is likely

13. Protecting public enforcement ● Greater level of private actions not at expense of public enforcement ● Leniency: leniency programme essential tool. If undertakings are discouraged from applying for leniency due to the risk of private actions, it is likely that a smaller proportion of cartels will be uncovered ● We consider that two guiding principles should be observed:  when defending a damages claim, a leniency recipient (that is, an undertaking which has been granted leniency by the European Commission, the OFT or any other NCA in the EU) should, as far as possible, be in the same position as it would have been if it had not applied for leniency, and  those who have suffered loss should not find it more difficult to obtain redress because one or more of the infringing undertakings has been granted leniency

14. Leniency – specific issues and options ● Leniency documents (that is, any documents created for inclusion in or to support an undertaking's leniency application) should not be used in court against the leniency recipient ● Should the immunity recipient benefit from removal of joint and several liability? ● Or should the immunity recipient be able to recover contributions of up to 100 per cent from non leniency recipients on a modified basis?

15. Disclosure ● Not appropriate to shift the burden of private actions to OFT, for instance through requests for disclosure or intervention in support of one party  Even in follow-on actions, OFT should act impartially and would not act in support of one party’s case  Private actions must not divert resources from public enforcement

16. Next steps ● We look forward to a stimulating debate ● We will hold a hearing in September to discuss the issues put forward in the consultation ● We will continue working closely with DG Comp ● Much can be done at domestic level and, based on the outcome of the consultation, we will make recommendations to the Government and take action ourselves, within the limits of the legal framework in which we operate, to address barriers to private actions and facilitate well-founded competition claims