The OFT also wants to change UK laws and procedures which limit
the funding of actions, to ensure that claimants can find lawyers
willing to represent them. It wants courts to have more discretion
to limit the risks of claimants having to pay the other side's
costs; and it wants to ensure that funding is available for
meritorious cases which would not otherwise be brought.
Under the Competition Act of 1998, a representative action can
be brought at present – but only in the Competition Appeal
Tribunal, and only when the when the OFT, a concurrent regulator or
the European Commission has made an infringement decision. As
competition authorities have finite resources, this limits the
number of cases in which consumers and businesses can seek redress.
According to its recommendations paper, competition authorities
detect around only 15% of cartels.
"If competition authorities were to pursue every single alleged
infringement, this would weaken rather than strengthen the
competition regime," says the OFT in its paper. "Resources would
have to be thinly spread over a great number of cases."
Instead, the OFT wants to focus on the cases that pose the
greatest threat to consumer welfare or vulnerable groups. The
introduction of standalone representative actions on behalf of
consumers and businesses would allow a greater number of
meritorious cases to be brought without prior action by a
competition authority, it argues.
"Small and medium-sized businesses should be on an equal footing
with both consumers and big business insofar as a realistic
prospect of obtaining redress for harm caused by anti-competitive
behaviour is concerned," says the OFT. "Actions by business are a
step towards balancing the economic harm caused by the offending
parties."
The OFT recommends a Government consultation on whether and how
to allow representative bodies to bring standalone and follow-on
representative actions for damages or injunctions on behalf of
businesses in competition law.
The OFT does not want such actions to be limited to 'named'
consumers or businesses; rather, it should be possible to sue in
the name of consumers or businesses at large, though it should be
left to a judge to decide this on a case-by-case basis.
The OFT says the plans do not signal a slide towards a US-style
litigation culture. It points out that the US litigation system
will remain different in important ways.
The OFT's representative actions will differ from America's
class actions, which can be brought by a single individual. "A
representative action is an action brought by a designated body or
a body given permission by the court," it explains. "In both cases,
criteria would apply, ensuring that only responsible bodies
genuinely acting in the interest of consumers or businesses are
given standing."
The UK also has a far more limited concept of punitive damages
than the US, compensation is never decided by a jury in England and
Wales (it can be in Scotland, though such cases are rare), and
multipliers of damages are not available in the UK, unlike the US,
where damages can be trebled for 'wilful' behaviour. Also, the
losing claimant in the US is not liable for the defendant's cost.
In the UK, it is common practice for costs to be awarded against
the losing party – though the OFT says "there may be merit in
clarifying the powers of the court to cap costs or grant the
claimant cost-protection on a case-by-case basis."
OFT Chairman Philip Collins said: "An effective private actions
system will enable consumers and businesses to obtain redress where
they have suffered loss as a result of unlawful agreements or
conduct. Increasing the incentives of businesses to comply with
competition law will stimulate interest in good corporate
governance and encourage the development of a competition culture,
in which responsible business leaders and boards recognise the
benefits of competition in properly functioning, open markets. This
will have positive effects on the productivity and competitiveness
of the UK economy."
