Breaking New Ground: The Growth of UK Collective Actions

Early Days of the UK Collective Proceedings Regime

Before the Consumer Rights Act 2015 introduced collective proceedings, there was no U.S.-style class action regime in the UK. Although the UK collective proceedings regime (the UK CPO regime) differs from its U.S. counterpart in several important respects, the UK CPO regime similarly allows claims on an opt-out basis, i.e., individuals suing on behalf of a whole class, without any active participation by class members. In its infancy, the UK CPO regime gave rise to various questions of fundamental principle, including how stringent the Competition Appeal Tribunal (the CAT) should be when assessing the appropriateness of collective claims at the certification stage of proceedings.¹ Progress of the UK CPO regime was effectively placed on hold until the Supreme Court delivered its landmark judgment in Merricks in December 2020, which addressed those questions, holding that the threshold for certification is very low.²

Where Are We?

A flurry of collective claims ensued following the Merricks judgment. Measured in terms of numbers of claims issued, which have been increasing year on year, the UK CPO regime has spurred competition litigation in the UK on a mass scale and attracted claimant law firms, litigation funders, and class representatives to pursue extremely high-value claims across various industries. Still, the UK CPO regime has led to only one substantive trial so far (in which judgment is currently awaited).³ Accordingly, it is too early to assess whether the UK CPO regime strikes the right balance between compensating consumers and ensuring unmeritorious claims are identified at an early stage. Further trials and judgments are being expected over the next few years, with the potential for additional guidance from the CAT, the Court of Appeal, and the Supreme Court.

Current Trends

In the meantime, new claims are being filed at pace. Experience from the United States, Canada, and other jurisdictions indicates that collective actions can result in significant damages awards and very substantial returns for legal advisers and funders.

Against this background, we have seen various claims being filed spanning various industries and case theories. Unsurprisingly, these claims include those based on well-known infringement decisions of the European Commission, such as the Trucks Cartel⁴ and the Power Cables Cartel,⁵ and a series of standalone claims against leading technology companies, including Amazon,⁶ Google,⁷ and Apple,⁸ typically alleging abusive practice revolving around pricing or consumer choice. In the case of Kent v. Apple, a collective action was launched before regulators had even concluded their investigations into the same issues.⁹

Growing Creativity

The UK CPO regime is restricted to claims arising from breaches of competition law. As things stand, claims relating to other areas of law, such as environmental law or breaches of consumer law, cannot be pursued by way of CPOs before the CAT unless there is also an allegation of a claim based on competition law. However, recent cases reflect a growing trend of claims being advanced often with links to competition law, which on the face of the claims appear rather tenuous in an effort to circumvent these restrictions. This is unsurprising given the potential financial incentives for funders and lawyers in bringing an opt-out collective action.

Examples include collective proceedings brought against Thames Water, alleging an overcharge of customers on sewerage services permitted by Ofwat on the basis of misleading information supplied by Thames Water and other water companies,¹⁰ and more recently, against the Performing Rights Society, on behalf of songwriters who have allegedly suffered loss as a result of unequal distribution of royalties amongst publishers and songwriters in breach of the competition rules.¹¹ Neither action has yet secured a CPO, with the certification hearing of the former having taken place in September 2024.

The Future

The UK CPO regime continues to develop, and future certification decisions and substantive judgments may impose outer limits on case theories in the UK CPO regime, including the strength of the link between alleged anti-competitive conduct and consumer loss. However, the CAT’s certification record to date suggests a low threshold for collective claims to be certified as suitable to proceed to trial. Accordingly, in light of the current permissive and expanding nature of the UK CPO regime, a broad range of companies should carefully consider their potential exposure to collective claims, including the significant financial cost attached to defending this type of claim, and steps they can take to insulate themselves against this growing threat.

The trends in the UK CPO regime before the CAT reflect the wider attitude and growing focus on consumer redress across Europe. As part of the Digital Markets, Competition and Consumers Act 2024, which received royal assent in May 2024, Parliament considered further important proposals which would have expanded the UK CPO regime. Most notably, one of these proposals would have formally expanded the scope of the UK CPO regime to include claims relating to unfair commercial practices in addition to competition infringements. Although this proposal was ultimately not pursued, it appears that it is only a matter of time before the UK CPO regime is expanded to include non-competition related claims.

Another important development on the horizon is a review of the third-party litigation funding landscape in the UK, which is currently being undertaken by a working group established by the Civil Justice Council. The review follows on from the judgment of the Supreme Court in PACCAR, which held that most litigation funding agreements currently in force are unenforceable. A full report of the Civil Justice Council is expected by summer 2025. Given that CPOs are generally only possible with the backing of third-party funders, the Civil Justice Council’s recommendations and any subsequent legislation to formally regulate third party funding will be an important next step in the evolution of the UK CPO regime.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.