COMPETITION BULLETIN

The Competition Appeal Tribunal’s recent decision in the trucks cartel claim raises some serious questions about expert economic evidence. In this post I want to flesh out some of the challenges and then float some suggestions for improvements.

The context

Many readers will know the basic background. Back in 2016, the European Commission decided that there had been a 14-year cartel between truck manufacturers. A wave of damages claims followed, and the first to come to trial in the UK was the claim brought jointly by Royal Mail and British Telecom against one of the manufacturers, DAF. There was a 25-day trial last year and judgment was given in February 2023. See Royal Mail v DAF [2023] CAT 6.

The judgment has attracted a lot of attention around Europe because, whilst there have been other judgments in other countries, this one benefits from the CAT’s usual attention to detail and robust testing of the facts and economics. The claimants succeeded in showing that they had suffered an overcharge, which the CAT fixed at 5% (roughly half of the claimants’ most optimistic calculations). The CAT decided there was no pass-on, and it made quite a hefty award of compound interest.

It is impossible to read the judgment without being struck by the long list of concerns raised about the expert evidence. A whole section is dedicated to criticising DAF’s overcharge expert for not being candid in explaining his history of involvement with DAF. The CAT also expresses disquiet about the way the experts tended to make judgments favourable to their clients. There is a complaint about the “huge” and “excessive” quantity of expert evidence. And then there is the fact that the ultimate outcome was that the Tribunal thought that none of the expert reports were robust enough to give an accurate overcharge estimate, which is why it ended up using a ‘broad axe’ to award the claimants 5%.

It is worth noting that, whilst the Royal Mail judgment might be a particularly stark example, anyone involved in competition litigation in the UK will have heard similar complaints in other cases.

Before making any suggestions for improvement, it is important to put the criticisms in context. We are extremely lucky to have such high-quality experts willing to work on competition damages claims, and it is a particular skill to present such complex issues in a way that us non-experts can understand. We are also in the fortunate position that, especially over the last 15 years or so, the courts in the UK have developed a variety of case management tools that make it easier to marshal and deal with such evidence – including encouraging meetings between experts, joint reports where areas of agreement and disagreement are identified, and the phenomenon of experts giving evidence in a joint session so that there can be a dialogue between them. It is largely because of these various features, which enable the courts to reach damages decisions with a high degree of specialist input, that UK damages judgments are watched so closely in other European countries – even after Brexit.

Indeed, given the way the Royal Mail judgment has been reported in some places, it is worth stressing, although the CAT did not feel that it could wholly rely on the claimants’ expert report, that report did act as a starting point from which the CAT then adjusted the figures downwards. So even in this case, with the various criticisms that were made, the expert analysis was critical to the result.

The other contextual point which needs acknowledging is the difficult position which the UK system puts experts in. On the one hand, each party can choose its own expert, who is then paid by that party to work closely with the client and legal team over several years. In the adversarial system it can be important to ensure that the main economic arguments are supported by experts on each side. On the other hand, an expert is formally independent, and their overriding duty is not to their client but to the court itself. When, in the Royal Mail case, the Tribunal comments on the fact that the experts tended to make judgments that favoured their clients, it prefaces its remarks with the words, “It is perhaps a flaw in the system.” To which one can only say: well, yes. I do not think there would be any appetite to change these basic features of the UK system, but no system is perfect and ours does have a serious tension at its heart.

The difficulties for experts do not end there. The courts want concise reports, but imagine what a judge would say if a part of the analysis which turned out to be important was not fully explained. In the Royal Mail case there was clearly an enormous amount of expert material, but on the other hand the experts will have known that it was an important and high-profile case which would attract considerable attention. The courts also want experts to be more open in accepting when the other side’s approach is reasonable, but that is risky if you don’t have confidence that the other expert will be equally fair-minded. And to make matters worse, there is relatively little formal guidance for such an important role, and the nature of English justice is that the principles tend to develop through the criticisms which are made of experts in particular cases. I do not mean to say that the criticism of DAF’s expert was not justified, but there must surely be a better way of anticipating and avoiding some of these issues in the first place rather than exposing experts to the risk of a public dressing-down.

Some suggestions

All of that having been said, there is clearly a need for the process to be improved.

One obvious area for improvement is case management. I have mentioned above several of the new approaches introduced over recent years, but the process of innovation should not stop there.

A case management tool which has not yet (as far I am aware) been used would be to limit the length of expert reports. Of course this would need to be done with care, but a sensible word limit, with the option of applying to add explanatory annexes if necessary, could have obvious benefits – including for the experts who would then be entirely justified in omitting (with an explanation) the less important material.

Another option which could work well in some cases (indeed this is being experimented with in the next wave of interchange claims) would be to have a series of smaller trials, for instance one on overcharge only, then another on pass-on only, and so on. That should have the advantage of making the expert issues more manageable.

I would also suggest that there may be more scope to use case management powers to require experts to jointly identify and explain the main economic issues in the case. It has long been the CAT’s hope that they can somehow achieve this, but unfortunately that hope has been routinely disappointed by the fact that experts end up disagreeing on so many issues: joint reports, whilst undoubtedly helpful, are often so large that it can be hard to see the wood for the trees. A step which might be useful here would be to require the experts jointly to identify the 10 or so judgment calls which have the strongest bearing on the result (for instance, in the Royal Mail case, the currency to use in the regression analysis would be one such judgment call), and to identify the main economic arguments on each side of that judgment call.

It is worth reiterating here that all that the CAT can do in these claims is to estimate the damage caused by an infringement. That is also all that economists can do. They cannot prove what the price would have been absent the infringement, since that is ultimately unknowable. As the statistician George Box famously said: “all models are wrong but some are useful”. That observation is worth reiterating because there really is no reason for the parties, or their lawyers or experts, to be shy in identifying and explaining the judgment calls which must necessarily be made in producing economic models.

Another area where improvements could be made is in the guidance given to experts.

This is an area where one can imagine experts taking the lead. There could, for example, be a commonly-agreed set of principles regarding how economic experts will approach their task – similar to the industry standards which reputable litigation funders agree to. Any expert instructed in a case would be free to, or perhaps encouraged to, sign up to the principles. They could establish common norms on a range of topics, including such things as how experts will collaborate in the pre-trial process; protocols for sharing information or assisting each other with explanations of databases; the production of joint reports; and, of course, guidance on the sorts of things which one would expect an expert to disclose as part of the obligations of independence and candour. A good starting point for this sort of guidance could be that which is given to experts acting in the Technology and Construction Court’s Guide (see Chapter 13).

Such principles would doubtless need input from lawyers, and perhaps the CAT might even be persuaded to endorse them in some way. The hope would be that they would ultimately provide a more reliable framework for experts to collaborate, as well as giving a stronger steer on what is expected in practice.

The objective in all of this should be ensure that the CAT obtains the very highest quality expert input, whilst also seeking to assist experts in the very difficult task of maintaining independence in an adversarial system.