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BIS proposal for 'opt-out' rule on class actions is misguided, says Hogan Lovells

02 August 2012

LONDON, 2 August 2012, The Department for Business Innovation & Skills (BIS) Private Actions in Competition Law consultation seeks views on reforms to anti-competitive behavior in order to empower consumers and businesses in bringing challenges. However, there are a number of proposals that require serious review, according to a response to the consultation made by Hogan Lovells this week.

The government's new competition litigation proposals include radical changes, including the introduction of a U.S.-style class actions system in the UK and assumption about the loss suffered by claimants in cartel cases. Hogan Lovells believes that, taken together, they run the risk of encouraging unmeritorious claims.

Nicholas Heaton, a competition litigation partner at Hogan Lovells, commented: "The current collective action regime for consumer competition claims has not produced the result intended when it was introduced as only one case has been brought using it.  However, introducing opt-out class actions to the UK, as suggested by BIS, would seriously increase the risk of speculative claims and introduce elements of the U.S. class action system that many would consider undesirable.

"If an 'opt-out' system goes ahead then strict certification criteria should be put in place and high standards set.  In particular there must be a thorough process of certification to establish that the class of persons bringing the claim is coherent and that their claims are capable of being heard in a single process.  Careful consideration would also be needed about whether the class of claimants could include individuals and business based anywhere in the world or should be limited in some way.

"The proposal to introduce an assumption in cartel cases that people have paid 20% too much for goods is worrying. It is a radical departure from the long established rule that claimants must prove that they have suffered some loss in order to be awarded compensation and represents a significant erosion of the rights of defendants.

"There is also a proposal to limit the ability of defendants to recover costs.  Taken together these proposals would undoubted encourage speculative claims. Claimant class action lawyers would potentially be able to bring claims on behalf of enormous classes seeking damages based on an assumed overcharge without running any adverse costs risk.  Faced with such claims, defendants may be force to settle whatever the merits."

In addition to a review of collective actions and costs the consultation also includes questions about whether the scope of the Competition Appeal Tribunal's jurisdiction, whether there should be a fast track route for SME cases, and what protection there should be for whistle-blowers from joint and several liability.

The consultation details can be found at: http://www.bis.gov.uk/Consultations/consultation-private-actions-in-competition-law

ENDS
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