COMPETITION BULLETIN

Has the CAT turned full circle in its approach to collective proceedings orders (CPOs)?

The short history of the CPO regime starts with the unsuccessful first application back in 2017 (https://www.catribunal.org.uk/sites/cat/files/1257_Dorothy_Gibson_Judgment_CPO_CAT_9_310317.pdf) followed shortly afterwards by the Supreme Court’s very applicant-friendly 2020 decision in Merricks v Mastercard (see our blog here – https://competitionbulletin.com/2020/12/11/collective-actions-in-the-supreme-court/). But a growing number of decisions since then suggest that the CAT has started to flex its muscles once more.

First, in O’Higgins v Barclays (https://www.catribunal.org.uk/sites/cat/files/2022-03/20220331_1329_1336_Final_CPO_Carriage_Judgment%20%5b2022%5d%20CAT%2016.pdf), two applications for opt-out CPOs were filed seeking to combine follow-on claims for damages arising from two European Commission infringement decisions. In its decision of 31 March 2022 the CAT was highly skeptical as to the merits of the claims but concluded – just – that considered singly, both applications should be certified. The main question was whether this should be on an opt-in or -out basis. The proposed class representatives (“PCRs”) argued that since the applications were for opt-out CPOs only, the CAT had no jurisdiction to make an opt-in order. 

The CAT rejected this and identified multiple factors weighing against opt-out certification, primary among which were the weakness of the applications and the fact that an opt-in claim would be practicable (there was a strong inference that potential class members were not opting in simply because they did not want to).

The CAT thus stayed both applications and gave permission for the PCRs to submit a revised application for certification on an opt-in basis. This was despite the applicants’contention that if the claims were not certified on an opt-out basis, there would be no proceedings at all.

However, in its judgment of 25 July 2023 (https://assets.caselaw.nationalarchives.gov.uk/ewca/civ/2023/876/ewca_civ_2023_876.pdf) – handed down on the same day as its judgment in the Trucks litigation (https://assets.caselaw.nationalarchives.gov.uk/ewca/civ/2023/875/ewca_civ_2023_875.pdf) – the Court of Appeal allowed the PCRs’ appeals. It ruled that the proceedings should be certified on an opt-out basis, because the CAT had erred both in treating its provisional view on the merits as definitive and in treating the strength of a case “as a sliding scale with a weaker case going to opt-in and a stronger case to opt-out”.

Second, on 20 February 2023 in Gormsen v Meta (https://www.catribunal.org.uk/sites/cat/files/2023-02/2023.02.20%201433%20Gormsen%20v%20Meta_FINAL.pdf) Marcus Smith rejected an application for an opt-out CPO. This was an abuse case relating to excessive pricing: it was argued that while Facebook was ostensibly “free”, users effectively paid for the service by providing valuable personal data and by receiving targeted adverts. Smith identified a number of difficulties with the PCR’s expert methodology and concluded that the Pro-Sys test (Pro-Sys Consultants Ltd v Microsoft Corporation [2013] SCC 57) had been unequivocally failed. Rather than refusing the application outright, the application was stayed for 6 months “to enable the PCR to file additional evidence setting out a new and better blueprint leading to an effective trial of these proceedings”.

Third, on 2 May 2023 in Gutmann v Apple (https://www.catribunal.org.uk/sites/cat/files/2023-05/2023.05.02_1468_Gutmann_Judgment_Adjournment_Final_0.pdf) the CAT of its own accord raised questions as to the factual basis of the abuse claim. Specifically, it identified a lack of evidential support for the pleaded proposition that after a certain software update, iPhones were rendered substandard, and that this amounted to abuse of a dominant position.

The CAT invited the PCR to make an application for disclosure so as to better plead his case and adjourned the CPO application.

Fourth, on 8 June 2023 in the long-running interchange litigation (https://www.catribunal.org.uk/sites/cat/files/2023-06/2023.06.08_1441-1444_Final%20Judgment%20%28CPO%20Applications%29%20%5B2023%5D%20CAT%2038.pdf) the CAT declined to grant any of four applications for CPOs against Visa and Mastercard entities. The (standalone) claims were for damages caused by the way in which Visa and Mastercard set their commercial and interregional multilateral interchange fees – charges incurred by merchants when consumers carry out credit or debit card transactions. The PCRs sought to bring both opt-out proceedings, including merchants with an annual turnover below a certain amount, and opt-in proceedings, which merchants with an annual turnover above a certain amount could choose to join.

The CAT held that the proposals foundered because (1) it was not satisfied that the proposed opt-out proceedings were brought on behalf of an identifiable class; and (2) since the PCRs had failed to provide a methodology for, inter alia, infringement, the CAT was unable to form a view as to the appropriateness of collective proceedings; it was particularly concerned about the inclusion in the proposed opt-in proceedings of merchants who had concluded transactions in the EU and the extent to which their issues were common to UK merchants; it was not clear how the collective proceedings were to be integrated with connected umbrella proceedings; and it was unlikely to be possible to determine whether any person was or was not a member of the opt-out class.

The CAT refused to grant the CPO applications in their current form and stayed proceedings for 8 weeks to allow the PCRs to present revised proposals.

To put the above cases in context, it is worth casting a glance back to the very first application for a CPO, decided in 2017. Gibson v Pride (https://www.catribunal.org.uk/sites/cat/files/1257_Dorothy_Gibson_Judgment_CPO_CAT_9_310317.pdf) was a follow-on claim seeking damages resulting from a Chapter I infringement. The OFT had found that Pride, a supplier of mobility scooters, had entered into agreements with eight dealers whereby the dealer would not advertise certain scooters online below Pride’s RRP. A CPO was sought on an opt-out basis. The CAT refused to certify the CPO after considering the expert methodologies. It held that the question was what loss flowed from the eight retailers’ agreements, not from the policy itself, rejecting the PCR’s argument that in the counter-factual, Pride would not have operated the policy at all, and that any distinction between the effect of the eight infringements and that of the wider policy was thus artificial.

The CAT invited the parties to consider whether the application should be adjourned to enable the reformulation of the claim and a revised methodology to focus on the effects of the eight agreements. The application was adjourned but ultimately the PCR was unable to return.

So, just how novel is the CAT’s interventionist approach? No doubt the PCR in Gibson would answer, wryly: not very. On one view, of course, the fact that in each of the above cases the CAT did not refuse the claims outright, rather giving the PCRs a chance to “have another go”, indicates a certain latitude is afforded to applicants. But in cases where the conditions of return make it effectively impossible to do so – or where the Court of Appeal does not, as in O’Higgins, come down on the side of the applicant – this will be small comfort.