Competition class actions come to Europeand lessons learned from US class actions21 October 2015

Robert BellMathew ReaLawrence Scarborough

Speakers

Robert Bell is head of the EU & UK competition team at Bryan Cave with over 20 years of experienceadvising on complex competition and regulatory matters involving some of the leading cases beforeThe Competition and Markets Authority, the European Commission and UK and European Courts.

He advises clients on a range of competition law issues including merger control, cartels, restrictivepractices, competition litigation and public procurement law.

Bell has a particular sector specialism in advising international technology and media clients on theapplication of competition law and new media, telecommunications regulation, and on competitionlitigation.

He is currently Chair of the City of London Law Society's Competition Law Committee, which liaiseswith the UK Government and the EU & UK competition regulators in connection with the reform ofcompetition law and practice.

Bell is recognised as one of London’s leading lawyers by The Legal 500 UK 2015, Chambers UK2015 and Chambers Europe 2015.

Contact: robert.bell@bryancave.com

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Speakers

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Mathew Rea is a partner in the Commercial Litigation Client Service Group and InternationalArbitration team in London. He has practised law for more than 20 years handling commercialdisputes, including extensive trial experience in the High Court and arbitrations in the LondonCourt of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) Court ofArbitration. In addition to significant litigation and arbitration experience, Mr. Rea also hascounselled clients on risk management and alternative forms of dispute resolution.

Mr Rea's client work has had a particular focus on the commodities, media and financial servicessectors. His experience extends to contract and commercial disputes, shareholder and jointventure disputes, commercial fraud claims, professional negligence and breach of trust claims.

Prior to joining Bryan Cave, Mr. Rea served as the Head of Commercial Litigation in London forDawsons LLP. He had previously served as Managing Partner of that firm. Mr. Rea is a practisingsolicitor advocate and has acted as lead advocate before both the Courts and domestic andinternational arbitration tribunals. He is also a Fellow of the Chartered Institute of Arbitrators, aMember of the London Court of International Arbitration, and a Member of the London SolicitorsLitigation Association. He speaks fluent French and has written for legal journals and for TheTimes.

Mr. Rea has been recognised in the 2015-2016 edition of The Best Lawyers in the UnitedKingdom and is recommended for commercial litigation work in The Legal 500 UK 2015 and forinternational arbitration work in Chambers UK 2014.

Contact: mathew.rea@bryancave.com

Speakers

Lawrence Scarborough has litigated and tried as lead counsel numerous matters on behalf of avariety of Fortune 500 clients, including leading companies in the computer, healthcare,semiconductor, semiconductor equipment, medical device, communications, defense and insuranceindustries. Claims involved in these cases ranged from class action claims to international claims,including antitrust, patent, copyright, trade secret, trademark, unfair competition and consumerprotection claims.

Scarborough represents clients in litigation around the country from the firm's Phoenix and New Yorkoffices. He served as the Phoenix Office Managing Partner from 2006-2011 and is a member of thefirm's Executive Committee.

Contact: lgscarborough@BryanCave.com

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Agenda

This webinar will examine:

1. An introduction to competition law and collective actions2. The new UK collective action regime3. Problems and uncertainties with the new UK regime4. US class action experience

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Competition Law in the EU/UK

• EU antitrust rules: Art. 101 & 102 TFEU (EU Commission,General Court)

• UK: Competition Act 1998, Enterprise Act 2002 (CMA, CAT)

• Private civil action for compensation

• Tort claim – breach of statutory prohibition

• Damages (actual loss, loss of profit, interest, loss of marketshare)

• Injunctions/Declarations

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Competition Law in the EU/UK

• Follow-on actions

- Infringement decision from the competition regulatorsare proof of breach (operative part)

- Only need to prove causation & loss

• Standalone actions

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Previous UK Position

• Regular proceedings

• Joint claimants using a singleclaim form (CPR 7 and 19)

• Group Litigation Orders (managedby the court) and ‘same interestrepresentative claimant’ (oneclaimant efficiently representing aclass) – both under CPR 19

• Consumer claims under section47B of the Competition Act 1998 -The Consumers’ Association vsJJB Sports plc

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EU Damages Directive

• The original intention was to create a pan-EU approach to private enforcement actions, includingopt-out collective actions, to foster competition law enforcement

• UK pulled ahead with the CRA 2015, bypasses lack of consensus in the EU

• Damages Directive provides for opt-in actions throughout the EU, the type that were sounsuccessful in The Consumers’ Association vs JJB Sports plc in the UK (see next slide).

• Commission Communication on Collective Actions

• Also stipulates pan-European approach on:• Making Member State competition infringement decisions prima facie evidence in other Member State

jurisdictions.• Minimum limitation period for infringement decisions to be at least 5 years• Rebuttable presumption of cartel harm, including for indirect purchasers• Endorses the ‘passing on’ defence• Safeguarding of EU leniency and settlement statements

• Directive due to be implemented in the UK by December 2016

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New UK Reforms• The new UK regime under the Consumer Rights Act 2015

• Stand-alone and follow-on actions now both possible before the CAT

• CAT granted power to issue interim and final injunctions

• 6 month ‘fast track’ procedure for simple competition claims

• Collective action provisions of the CRA 2015:

• Opt-out collective actions – now permitted under section 47B of the Competition Act1998 (A form of opt-in representative action was already available under CPR 19.6)

• Collective settlement procedure

• Voluntary redress schemes before the Competition and Markets Authority

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Collective Actions – Consequences andEffects

• Tide of competition litigation – mostly follow-on actions

• Problem of dealing with multi-party actions

• Opt-out collective actions create a significant extension ofthe competition law litigation landscape

• The potentially high level of damages poses a significant riskto defendants

• Collective claimant system encourages cases which wouldnot otherwise be bought

• Businesses need to prepare to meet the challenge the newsystem brings in terms of dealing with collective actions andthose who opt-out of the class

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Commencing a Collective Action

• To commence a collective action before the CAT you mustobtain a collective proceedings order.

• To obtain a collective proceedings order you must:• Appoint a representative for the class

• Identify (or certify) members of the class having the same cause ofaction

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Appointing a representative for a class

• CAT has wide discretion to approve a person as arepresentative where it considers it “just and reasonable todo so”.

• The representative may be appointed if they:1. Would fairly and adequately act in the interests of the class members;

2. do not have a conflict of interest with class members;

3. is the most suitable representative; and

4. would be able to pay the defendant's recoverable costs, if ordered to do so,or satisfy any undertakings as to damages, in the event an interiminjunction is sought.

• No blanket ban on law firms, third party funders or SPVs but CAThas expressed reticence at their suitability as representatives

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Certifying of class

The CAT will only allow a Collective Proceeding Order if it issatisfied that the claimants in question are eligible. Claims areeligible when:1. The claims are brought by an identifiable class of persons, defined as

narrowly as possible, i.e. it must be possible to determine whether anyparticular person falls within the class using an objective definition;

2. the claims must raise "the same, similar or related issues of fact orlaw"; and

3. the claims must be "suitable" for collective proceedings. (i.e. that theclaim is suitable for an aggregate award of damages, with eachparticipant receiving an equal share should they have purchased anequal amount of a good or service)

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Problems and uncertainties with the newUK regime

1. Permission - An opt-out action in the UK cannot be commencedwithout the permission of the CAT in the form of an Order, and of thecertification of the class representative (in most cases the threat ofaction will be sufficient to broker a settlement).

2. Lack of incentive - The CAT will have jurisdiction to award damages ona purely compensatory basis, with no option to award exemplary orpunitive damages. Further, lawyers cannot take cases on acontingency fee (cut of the damages) basis for opt-out actions

3. Residual damages – All damages awarded to the class will be paid bythe defendant whether or not claimed by members of the class.Residual damages will be paid to the Access to Justice foundation

4. Funding – Who will fund and what is their payback? CAT has discretionto award any residual damages to the class representative for costsand expenses in proceedings

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Problems and uncertainties with the newUK regime - Cont

1. Risk - As before, the practice of the losing party assuming liability forthe winning party’s incurred costs will be maintained.

2. Anchor defendants – Issue applicable for all enforcement casesrelating to the jurisdiction and grounding claims in the UK to benefitfrom the litigant friendly environment.

3. The position of foreign claimants - Currently the opt-out nature onlyapplies to UK domiciled claimants. Non-UK claimants must opt-in.

4. Transitional and limitation periods – Paragraph 8 of Schedule 8 of theCRA 2015 inserts a new section 47E into the Competition Act 1998and creates a 6 year limitation period to mimic the High Court, buttransitional provisions under the CAT rules confuse proceedings.

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US class action “export-ese”

UK seen as fertile litigation ground - American firms expand in EuropeBy Michael Peel, Legal Correspondent

From FT article of 30 October 2007, Britain has “the most fertile ground in Europe” inwhich a collective litigation culture could take root, according to research by theEconomist Intelligence Unit..

“The study – sponsored by Bryan Cave, a leading US class action defence firm – is thelatest salvo at critics who say the structure of the English legal system makes masslitigation by shareholders and others an unlikely prospect.”

“Lawrence Scarborough, a Bryan Cave partner, acknowledged the existence of a “fairamount of UK scepticism” about class actions, but added that the survey showed manycompanies thought otherwise.”“The message is a sobering one,” he said. “The majority of the respondents believethat collective litigation is going to be prevalent in a three- to five-year period. “

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Differences with UK Regime• Punitive Damages

• Antitrust laws: “[A]ny person who shall be injured . . . by reason of anything forbidden in theantitrust laws . . . shall recover threefold the damages by him sustained.” 15 U.S.C. § 15(a).

• Racketeer Influenced and Corrupt Organizations Act: “Any person injured . . . by reason of aviolation of [RICO] . . . shall recover threefold the damages he sustains.” 18 U.S.C. § 1964(c).

• State law: State laws also may provide for double or treble damages for unfair competition.See, e.g., Mass. Gen. Law, Ch. 93A.

• Due Process Concerns: Although there is no “bright-line ratio which a punitive damagesaward cannot exceed . . . few awards exceeding a single-digit ratio between punitive andcompensatory damages, to a significant degree, will satisfy due process.” State Farm Mut.Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003).

• Damages Based Agreements• “It is ethical to charge contingent fees as long as the fee is appropriate and reasonable and

the client has been fully informed of the availability of alternative billing arrangements.” ABAFormal Ethics Opinion 94-389 (citing ABA Rule 1.5).

• No Passing on Defence• Courts hold “direct purchasers to be injured to the full extent of the overcharge paid by them”

even if the damage has been absorbed by the consumer (the indirect purchaser). Ill.Brick Co.v. Ill., 431 U.S. 720, 746 (1977).

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Problem of Class Certification• Class Action Fairness Act of 2005 (“CAFA”)

• Grants federal courts jurisdiction over class actions with more than $5 million in controversy,more than 100 class members, and where there is diversity between at least one classmember and a defendant.

• Four prerequisites for a class action under Rule 23(a):

• (1) sufficiently numerous parties (“numerosity”);

• (2) common questions of law or fact (“commonality”);

• (3) typicality of claims or defenses; and

• (4) adequacy of representation.

• NOTE: This has not been a significant factor in US and almost anyone can serve, including paralegal ofplaintiff’s law firm.

• Certification of a 23(b)(3) class requires:

• (1) questions of law or fact common to class members predominate over any questionsaffecting only individual members (“predominance”);

• (2) a class action is superior to other available methods for fairly and efficiently adjudicatingthe controversy (“superiority”); and

• (3) the class is readily ascertainable based on objective criteria (“ascertainability”).

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Conclusion

• UK opt-out collective proceeding system is the first opt-out system inEurope in a claimant friendly jurisdiction

• Many uncertainties of how it will operate in practice• US experience crucial in moulding UK system and avoiding pitfalls

experienced elsewhere• The new system has the potential to change the UK litigation landscape.• Defendants need to be prepared for a potential litigation surge with high

damages awards• Whether this surge materializes depends upon whether sufficient

incentives to litigate exist

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eu-competitionlaw.com

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CPD Points

• CPD points and CLE credit are available for this webinar.

• CPD points and CLE credit may be collected by emailing:europe.marketing@bryancave.com

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This presentation was prepared by Bryan Cave exclusively for the benefit of the persons attending the presentation and any otherpersons to whom material used in the presentation is distributed by Bryan Cave. The material used in relation to the presentationand any non-public information conveyed during the presentation is confidential and no part of that material or information may bedisclosed or provided to any third party without the prior written permission of Bryan Cave.

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