Pandora’s Box has been opened. The rise of certified opt-out collective proceedings

Following the Competition Appeal Tribunal’s (CAT) first ever certification of an application for a collective proceedings order on an opt-out basis in Merricks v Mastercard[1] last month (covered in our previous update available here), there have since been two further opt-out claims which have been certified by the CAT in quick succession. In this article, we take a look at these latest two claims and their implications generally for the opt-out regime for competition claims.

What is an opt-out class action?

The Consumer Rights Act 2015 introduced a fresh process for the pursuit of claims arising from breaches of competition law, such as price fixing amongst competitors or abuse of a dominant position in the market. The process allows for the pursuit of claims on an ‘opt-out’ basis i.e. potential claimants will be included in the claim unless they opt-out of the process. There are however strict preconditions to the opt-out process including definition of the class of claimants and arrangements for funding, administration and distribution. The court oversees these arrangements as gatekeeper to the procedure in a “certification” process. That certification process has been at the core of the development of the new procedure.

Opt-out class action against BT Group

On 28 September 2021, the CAT certified opt-out collective proceedings against BT for its alleged abuse of its dominant position in standalone landline telephone services[2]. The claim itself, estimated to be worth £600 million, is brought by Justin Le Patourel (a leading telecoms expert), as class representative on behalf of approximately 2.3 million of BT’s landline customers in the UK for alleged excessive pricing. BT customers who are automatically included within the class action include “Voice Only Customers” (those who only had a BT landline telephone service between October 2015 and April 2018, but no broadband service) and “Split Purchase Customers” (those who also had broadband alongside a landline telephone service).

The claim rests upon a finding from a 2017 investigation by the UK’s communications regulator, Ofcom, which found that BT had been overcharging its landline customers by setting its prices for standalone landline telephone services above a competitive level. Ofcom subsequently accepted commitments from BT to reduce the price of its future bills, but BT ultimately failed to compensate its affected customers for previous overcharging.

BT applied for strike-out and/or summary judgment, arguing that Justin Le Patourel’s claim was groundless and had no real prospect of success. Were that application to be unsuccessful, BT also opposed certification of the claim on an opt-out basis rather than on an opt-in basis (where class members have to take action to opt into the proceedings).

However, both of BT’s arguments were dismissed by the CAT. Of note, the CAT found that Ofcom’s 2017 review was a noteworthy element of evidence as to BT’s liability on which Justin Le Patourel was entitled to rely on for the purposes of bringing a claim.

What happens next?

Now that the claim has been certified by the CAT, the case is set to proceed and should the case be successful, it is said affected BT customers may receive up to £500 each in compensation.

Opt-out class action against South Eastern and South Western rail franchises

On 19 October 2021, the CAT certified two separate applications[3] for opt-out collective proceedings against the operators of the South Eastern and South Western rail franchises in respect of alleged abuses of their dominant positions in relation to the sale of “boundary fares” (which allow TFL Travelcard holders to travel beyond the zones covered by their Travelcard without paying twice). The claim, with an estimated worth of £93 million, is brought by Justin Gutmann as class representative on behalf of approximately 3 million affected London Rail passengers.

The claim is premised on the argument that the train operating companies abused their dominant position by “failing to make so-called Boundary Fares sufficiently available and/or to use their best endeavours to ensure general awareness among their customers of Boundary Fares, so that customers who held Transport for London Travelcards and took journeys beyond the outer zone covered by their Travelcard would not purchase a fare covering the totality of their journey, but only a Boundary Fare to supplement their Travelcard”. As a result, a large number of Travelcard holders paid twice for part of their rail journeys.

In its judgment, the CAT dismissed the applications for strike out and summary judgment of the Defendants and held that the claims should be allowed to proceed on an opt-out basis.

What happens next?

Now that the CAT has given its green light for the claims to go ahead, both cases will now proceed to full trial, and should they be successful, affected London rail passengers who have, allegedly, been double-charged will be offered compensation for their loss.

Has Pandora’s Box been opened?

It is fair to say that the class action opt-out regime for competition damages claims has been off to a slow start since its inception with the advent of the Consumer Rights Act 2015. However, with a total of three certification judgments in the last few months, and with another 10 opt-out collective proceedings currently before the CAT, it’s safe to say that Pandora’s Box for certified opt-out claims has well and truly been opened.

If you have any questions regarding these latest case developments or their practical implications for the opt-out class action regime, please contact David Greene or any other member of our Class Action and Financial Litigation team.

[1] Merricks v Mastercard Incorporated & Ors [2021] CAT 28

[2] Justin Le Patourel v BT Group PLC [2021] CAT 30

[3] Justin Gutmann v First MTR South Western Trains Limited and Another [2021] CAT 31

Justin Gurmann v London & South Eastern Railway Limited [2021] CAT 31

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