Collective actions - Certification in the United Kingdom two years after the Supreme Court judgment in Merricks
The possibility to file an opt-out collective action in competition claims before the UK Competition Appeal Tribunal (CAT) was introduced in 2015. However, the regime got off to a slow start with the first case being refused certification, while the second case to be filed, Merricks v MasterCard, worked its way up to the Supreme Court on the crucial question of the proper approach to certification. This delayed progress of the regime for several years. After the Supreme Court’s judgment in Merricks in December 2020, the dam was unstopped. More than 20 claims have launched in the wake of Merricks, with nine of those certified to date and three being refused certification, subject to appeal. But what have we learned from those decisions?
Certification of collective claims in the UK focuses on two conditions: the authorization condition and the eligibility condition. The cases so far have shed light on both of these requirements, including the key judgments this year from the UK Court of Appeal.
The authorization condition
The authorization condition (approving the proposed class representative and their arrangements for bringing the claim) has been relatively uncontroversial to date, and was not considered by the appellate courts in Merricks. So far, defendants have not seen fit to attack the suitability of the class representatives themselves, though in Boyle v GTR, the CAT declined to authorize two class representatives jointly, preferring to authorize one of the joint applicants alone in circumstances where the other had made some unguarded remarks about the defendants on Twitter. In that case the refusal to certify one of the applicants did not cause any difficulty, as he was applying jointly with the other proposed representative. While a level of proximity/expertise relevant to the underlying conduct is generally thought to be favourable, a degree of professional distance also seems desirable.
Defendants have, though, routinely tested whether the arrangements put in place for the pursuit of the claims have satisfied the various conditions set out in the legislation, as the scope of these criteria has been clarified. To that end, funding and insurance arrangements have come under some scrutiny; the adequacy of these arrangements goes to two of the authorization criteria: the ability of class representatives to act fairly and adequately in the interests of the class, and their ability to pay the defendant’s recoverable costs if ordered to do so.
To date, however, the CAT has shown little interest in entertaining the minutiae of arguments to the effect that class representatives have inadequate funding or insurance cover, seemingly recognizing that such arrangements may need to be expanded as the proceedings go on. Indeed, the CAT has taken a pragmatic approach to those issues that it has considered to have some merit, allowing class representatives and funders to modify their arrangements, notably the terms of funding agreements, when a provision was thought to be problematic – we have notably seen changes to the mechanisms for consulting funders on settlement to ensure independence of the class representative. Those early cases, where such points were raised, have provided guidance to the cases that followed, with the result that in some of the more recent claims to be certified, no issue relating to the authorization condition has been raised at all, and the issues raised at certification are becoming much more streamlined and targeted. There will, however, be an appeal heard by the Supreme Court in the Trucks case in 2023 regarding an argument by one of the defendants as to whether funding arrangements based on a percentage of the damages infringe the costs rules, an issue likely to be relevant to the majority of collective proceedings.
The eligibility condition
The eligibility condition has generated more activity in the cases to date. The Supreme Court established in Merricks that the assessment of whether claims are eligible to be brought in collective proceedings did not involve an evaluation of the merits of the claims. One exception to that principle, though, has been when defendants have applied to strike out the claims (which was not the case in Merricks). The result has been that several defendants in later cases repurposed their attacks on the merits of proposed collective claims as applications to strike out the claims. However, given the relatively low threshold needing to be overcome to survive such an application, so far no application to strike out a collective claim has been successful.
The FX decision addressed the other ‘exception’ to the rule that assessment of certification does not entail any assessment of the merits of the claims, i.e. where the CAT has to consider whether the claim should be brought on an opt-out or opt-in basis – the CAT Guide suggesting that the merits would be relevant. The CAT seized the opportunity presented by the defendants’ argument that the claims should have been brought on an opt-in basis to engage in an extensive analysis of the merits of the claims, ultimately refusing certification on an opt-out basis (which was the only basis sought). The CAT’s judgment is now under appeal, providing the Court of Appeal another opportunity to consider the issue of opt-in vs opt-out.
In BT v Le Patourel, the Court of Appeal declined to interfere either with the CAT’s decision to certify opt-out proceedings, or the CAT’s view that opt-in proceedings were impractical. The Court of Appeal noted that it was a relevant factor that take up of opt-in proceedings would likely be limited and that there was a large class with small individual claims. In FX there was evidence to the effect that claimants did not want to opt in to litigation, so it remains to be seen whether the Court of Appeal will take a different view with respect to a class made up of businesses to that expressed in BT (where the claimant class was made up of consumers), or will continue to apply the test of practicability in circumstances where many such business claims would be considered small in the context of complex, large-scale litigation.
The collective claims launched so far have resulted in differing approaches to dealing with classes made up of businesses. In FX, certification was sought on an opt-out basis; in RoRo, the class is a mix of consumers and businesses and the CAT rejected the argument that large businesses should be excluded from the opt-out class but should rather have to opt in. In Trucks, the RHA (an industry association) succeeded in obtaining certification for an opt-in claim while a rival claim for a class largely made up of businesses was refused certification on an opt-out basis, although the ruling is subject to an appeal.
Assessing eligibility – a credible methodology
Following Merricks, the debate around whether the eligibility condition is satisfied has centered on the presentation of a methodology for assessing loss on a class-wide basis. The broad test, imported from the Canadian Supreme Court’s judgment in Pro-Sys v Microsoft, and quoted by the UK Supreme Court in Merricks, is that the methodology should disclose a realistic prospect of establishing loss on a class-wide basis, and not be purely theoretical or hypothetical. The methodology must be grounded in the facts of the case.
The methodology put forward by the class representative has been tested to varying degrees in different cases to date. In Consumers’ Association v Qualcomm, experts instructed by each side were questioned by the CAT in a ‘hot tub’, whilst in other cases experts instructed by the defendants have not been heard, and indeed some defendants have not disputed that a sufficiently credible methodology has been put forward. It is probably too early to say that an orthodox approach has emerged, but observations by the CAT, e.g. in RoRo, that it is not the goal at the certification stage to determine the best methodology available, but instead to assess whether the class representative’s methodology is sufficiently credible, suggest that it is outside the scope of the defendant’s role at the certification stage to put forward its own expert evidence.
Going beyond loss as a common issue
The observations of the Supreme Courts of Canada and the UK relating to the existence of a credible methodology reference the assessment of loss on a class-wide basis. The Trains decisions by the UK CAT, though, have raised the question of differences in the position of individual class members that affected matters of liability and causation, i.e., whether some class members had in fact suffered loss. The defendants contended that in many cases class members would not have suffered a loss as a result of the alleged anticompetitive conduct. They contended that liability was not a matter that could be determined in the aggregate, and that this ought to be fatal to certification of the claim. However, the Court of Appeal held that, on a proper reading, the UK legislation does permit the determination of liability on an aggregate basis. In essence, the Court’s position was that where certain groups of class members had suffered no loss, or no loss was suffered in certain situations, these would be removed from the scope of the loss in the aggregate, and thus categories of class members suffering no loss would be excluded. That judgment may have enduring relevance to future cases where the conduct complained of has the effect of influencing consumer choice.
While the existing decisions on certification have provided some guidance on the development of the regime in relation to the authorization and eligibility conditions, the CAT also has had to grapple with the question of carriage – that is where more than one party seeks authorization to act as class representative. This is a familiar notion in jurisdictions with established class action regimes, and it is unsurprising that the issue of carriage already has arisen in two cases in the UK. What has not yet emerged, though, is a clear framework for determining the question of which claim should be allowed to proceed.
In FX the CAT refused an application to deal with carriage as a preliminary issue, and instead the issue of carriage became intertwined with questions of whether the claims should be certified, with the CAT ultimately concluding that, while one claim (Evans) was more coherently presented than the other and would therefore have been preferred, neither should be certified on an opt-out basis. The decision is currently under appeal, but it is clear that the carriage dispute in FX triggered something of a race between the competing class representatives in relation to their funding and insurance arrangements, with the CAT ultimately showing little interest in selecting one class representative over the other based on these and other criteria that related to matters falling under the authorization condition. This is another area where the merits of the respective claims may inevitably come in by the back door, with the representatives seeking to explain why their case is the better formulated. In Trucks, the successful class representative (RHA) sought certification on an opt-in basis, while the unsuccessful rival (UKTC) sought opt-out, or alternatively opt-in. Whilst the CAT weighed multiple factors, the overriding consideration appeared to be a preference for the methodology put forward in support of the RHA’s opt-in claim. So, as in FX, the substantive merits of the claim as put forward appeared to be the decisive factor in determining carriage. But with carriage likely to be an issue in future claims, the approach the CAT will take to deciding which of multiple candidates should be certified is, for the time being, rather unclear. This is likely to be a key issue for 2023, which must be resolved in order for class representatives and their funders/insurers to have some certainty as the process and associated timeline and costs.
It is fair to say that the two years since the Supreme Court’s judgment in Merricks have seen collective claims take off in the UK. The regime is set to develop apace over the next few years as cases move into the phase of substantive litigation. We anticipate that the first trials should take place in late 2023 and 2024.
*Aqeel Kadri is Counsel and Nicola Boyle is Partner in London.
  UKSC 51.
  CAT 35, para. 15 (3)(ii).
UKSC 2021/0078 R (on the application of PACCAR Inc and others) (Appellants) v Competition. Appeal Tribunal and others (Respondents).
 See e.g. DAF’s submission in  EWCA Civ 229, paras. 82-85.
  UKSC 51, paras. 113-114.
  CAT 16.
 CAT Guide to Proceedings, 2015, at para. 6.39, quoted in of  CAT 16, para. 103.
  EWCA Civ 593.
 Ibid, para. 74.
  CAT 16, para. 35.
  CAT 10, paras. 151 – 170.
  CAT 25.
 Pro-Sys Consultants Ltd. v Microsoft Corporation  SCC 57.
  UKSC 51 at para. 135.
  CAT 20.
 See  CAT 10, e.g. paras. 105, 107, and 110.
 Cases 1304/7/7/19 (Justin Gutmann v First MTR South Western Trains Limited and Another) and 1305/7/7/19 (Justin Gutmann v London & South Eastern Railway Limited).
  EWCA Civ 1077, paras. 38-39.
  CAT 16, for relative strength: para. 389 (4); for opt-out: para. 408.