Private actions for breach of competition law could see banks in the firing line

The Consumers Rights Act 2015 will revolutionise the way victims of anti-competitive behaviour sue for damages, according to lawyers.

Before today (1 October 2015) private actions for breach of competition law have been the domain of businesses able to afford embarking on expensive litigation.

Under new consumer rights law, however, cases brought by small or medium sized enterprises (SMEs) will be considered for a fast track procedure, designed to make it cheaper and quicker to seek redress from large companies or groups abusing their market power.

The Act gives extensive new powers to the UK's specialist competition court, the Competition Appeal Tribunal (CAT), which can place caps on costs and restrict the amount of evidence and number of expert witnesses presented in a case.

The legislation also introduces a mechanism for infringing companies to propose voluntary redress schemes to compensate victims, which may be approved by the Competition and Markets Authority (CMA).

Also, for the first time, victims will be able to bring a claim on behalf of an entire class. The reforms provide for class actions, allowing a single representative to bring a claim on behalf of an entire category of claimants.

Where claimants 'opt-in', they will benefit directly from the claim. Alternatively an 'opt-out' collective action claim can be brought on behalf of a defined group without the need to identify individual group members.

Such actions could have a major impact on the banking industry with foreign exchange manipulation a possible test case depending on an investigation by the European Commission into the Forex-rigging scandal is completed.

Reflecting on the changes, Stephen Critchley, a senior associate in Collyer Bristow's banking and financial disputes team, said: 'It is difficult to predict how popular opt-out actions will be, not least because of the risk in bringing them.

'They will usually be underwritten by third-party funders in exchange for a share of any damages and/or lawyers acting on a contingent basis. A large volume of work must be done before the CAT decides whether to certify the class, which may all be wasted if certification is not granted.

'However, it is expected that, sooner or later, there will be a claim large enough to justify testing the water, in which regard foreign exchange rate manipulation is an early candidate, depending on the European Commission's imminently expected decision on that issue.'

Commercial law firm MMS is advising businesses to educate staff on the law of collusion and the dangers of inadvertently entering into anti-competitive arrangements.

Catriona Munro, a partner in the EU competition and regulatory team at MMS, said: 'Most companies know that anti-competitive agreements and abuse of dominant market positions are illegal, but it is possible to fall foul of the law through seemingly innocuous agreements made casually with competitors.

'It is, therefore, essential that managers also take a thorough overview of the situation and that suitable due-diligence is carried out across commercial operations.'

She continued: 'Raising awareness of competition law is often regarded as a necessary evil, to keep sales staff on the right side of the legal line and reduce the company's exposure to fines.

'What is less often appreciated is that awareness of competition law can also identify breaches of the law by suppliers or customers, which may have operated to the company's detriment. If this is the case, today's changes to the law may make it easier to seek redress.'

Matthew Rogers is an editorial assistant at Solicitors Journal matthew.rogers@solicitorsjournal.co.uk