CN06 - CAT certifies 2bn opt-in collective proceedings arising from Trucks cartel

On 8 June 2022, the Competition Appeal Tribunal ("CAT") handed down judgment in respect of two applications for collective proceedings (heard jointly) comprising follow-on damages claims arising from the European Commission's 2016 infringement decision in relation to the Trucks cartel.

Key takeaways

• The CAT will be reluctant to certify two related applications for collective proceedings where there is a significant degree of overlap between the claims.
• It will be critical to a potential applicant's case in a cartel damages claim to develop and present a "sound methodology" for calculating the alleged overcharge and the resulting damages to be awarded.
• Proposed class members who were subject to an alleged overcharge in respect of a particular product or service are likely to meet the "same or similar interest" requirement for collective proceedings, even where they have suffered different amounts of loss. Nevertheless, this will be fact-specific and must be assessed on a case by case basis.

Background

The applications were brought by UK Trucks Claim Limited ("UKTC"), which sought certification on an opt-out basis, and Road Haulage Association Limited ("RHA"), which sought certification on an opt-in basis. 

While the CAT found that both were applications capable of certification as collective proceedings, it felt it would be "wholly inappropriate" to allow the two claims to proceed in parallel given the similarities between them. Ultimately, the CAT found that the opt-in action brought by RHA was more suitable to proceed, and certified its claim on that basis (subject to certain amendments to the class definition), exposing the truck manufacturers ("OEMs") which are defendants to the action to potential liabilities of approximately £2 billion.

Suitability for collective proceedings 

Turning to the initial question of suitability, the CAT concluded that it would be "fanciful to suppose that, save for a few exceptions, PCMs [proposed class members] could bring independent, individual actions" given the number of small claimants within the proposed class in each claim, stating that "potential damages recovery on an individual basis for such claimants is dwarfed by the vast cost of such damages proceedings, and it is unrealistic to expect small businesses to take the risk of litigation of this nature against major and very well-resourced defendants". 

In particular, the CAT was persuaded by the "judicial economy" to be achieved in trying these claims collectively in light of the very many individual Trucks claims before the CAT, which were "already a cause of concern". As such, both claims were found to meet the suitability condition. 

Overlapping proceedings

In seeking to represent its proposed class, UKTC raised the issue of whether the CAT was permitted under law to allow two sets of proceedings with a significant degree of overlap to proceed. Referring specifically to Rule 78(2)(c), counsel for UKTC submitted that the CAT Rules 2015 do not preclude opt-out proceedings from running concurrently with related opt-in proceedings. 

The CAT did not consider it necessary to resolve the issue of interpretation of the Rules, deferring instead to the governing principle that cases should be conducted at proportionate cost and as efficiently as possible (Rule 4, CAT Rules 2015). In the CAT's view, the significant complexity of the claims required it to determine the "quasi" carriage dispute, not least to reduce the potential for confusion amongst members of the claimant class who may not be certain which of the two claims they might be eligible to join. 

Common issues

Counsel for the defendant OEMs sought to challenge both applications on the basis of a lack of common interest amongst the members of each proposed class. Specifically, it was submitted that the heterogeneity of the proposed classes, the differentiated nature of the trucks sold during the cartel period, and the differences in the alleged effect and loss suffered by individual class members (particularly in respect of any pass-on) necessarily meant that no common issue could arise. 

Rejecting these arguments, the CAT disagreed that "for there to be a common issue there must be not only a common question but also a common answer", and confirmed that "commonality does not require that the question receives an identical answer for all PCMs". Going further, it considered that it would "frustrate the Parliamentary intention in introducing collective proceedings for competitions claims" if only those cases "involving commoditised products and undifferentiated consumers" were allowed to proceed. 

In this case, the fact that the European Commission had, in its infringement decision, found "overarching systemic wrongdoing", and that each of the claimants alleged the same overcharge as a result, led to the class members having the requisite "same or similar interests". 

Nevertheless, the CAT went on to emphasise the fundamental requirement that a "sound methodology" is established to "resolve the issues on a common basis (even if the answer will not be the same or even apply to all class members)" in order for claims to be suitable for collective proceedings. The CAT held that "if there is no plausible method of addressing the proposed common issues on a common basis," then "the claims are not suitable for collective, as opposed to individual, proceedings". This underlines the critical importance of the development of a credible method for estimating and quantifying harm for applicants in such cases. 

Expert methodologies

The CAT's choice of class representative in large part turned upon the relative strength of the methodologies for estimating the alleged overcharge which were introduced by the respective experts instructed by the claimant parties. 

While each expert proposed very different approaches, the CAT was satisfied that, as a starting point, both were plausible propositions which met the general test outlined by the Supreme Court of Canada in Pro-Sys Consultants Ltd v Microsoft Corporation [2013] SCC 57 to which the CAT had regard; namely, that the methodology must be "sufficiently credible or plausible to establish some basis in fact for the commonality requirement". However, it found that the econometric regression analysis proposed by RHA's expert was more "robust" than the simulation model put forward by UKTC's expert. In particular, the CAT was persuaded by the already well-established use of regression models for the purposes of calculating cartel damages. 

In contrast, the CAT expressed concern that the methodology proposed by UKTC's expert would lead to a "drastic simplification" of the issues, and would necessarily rest upon extensive assumptions or, alternatively, be subject to intensive data demands, in order to produce accurate results. While the CAT recognised that UKTC's expert could not be expected to have access to the requisite data at this stage of the proceedings, the fact that RHA's application was formulated as an opt-in action—and therefore that an abundance of data would be provided  by the claimant class to the expert acting for it—was a "very significant advantage" for that claim. Consequently, the CAT considered that RHA's methodology would ultimately produce a more sophisticated analysis. 

Finally, while neither applicant advanced a pass-on case, RHA's inclusion of a proposed method of calculating potential pass-on was welcomed by the CAT, which considered it an "inevitability" that such a defence would be raised by the defendants. Following Merricks, the Tribunal confirmed RHA's contention that such estimations would necessarily be carried out on a "broad axe" basis. 

Notably, however, the CAT warned future litigants against introducing a "plethora" of expert reports at the certification stage, despite the apparent importance of sound econometric investigation to the CAT's decision. A post-script to the judgment notes the CAT's view that "the hearing of a CPO is not a battle of experts and is not assisted by a large number of expert reports, reply reports and response reports", and that parties should seek the permission of the CAT before serving such evidence. Future applicants in complex cases will accordingly need to find a balance between presenting a plausible and sophisticated quantification methodology on the one hand, and avoiding unnecessarily extensive expert involvement on the other.

Opt-in vs. opt-out

On the basis that, as of March 2021, over 17,500 potential claimants had already signed up to RHA's claim (with that number expected to increase upon the granting of any collective proceedings order), the CAT saw "no practical problem in converting potential claimants into litigants" and therefore no compelling reason to certify the claim as anything other than opt-in proceedings.

The CAT went on to clarify, however, that eligible members of the class who are already participants in separate, individual proceedings will not be able to join the collective action. 

Calculation of damages

The two applicants sought damages on different bases. While the UKTC proceedings sought an award of aggregate damages, RHA looks to recover individual damages calculated using average figures produced by its proposed overcharge analysis. The defendant OEMs argued that RHA's method would offend the compensatory principle, given the variation in actual loss suffered by each individual claimant. The CAT disagreed; quantifying damages in this way would not lead to any greater financial liability for the defendants than if average figures were used to calculate aggregate damages. In short, the reality of the case necessitated a pragmatic approach. 

Funding arrangements

The nature of RHA's funding arrangement with its litigation funder, Therium, is the subject of an ongoing legal challenge by the defendant OEMs, on appeal to the Supreme Court. The basis of this appeal is that it constitutes a damages based agreement which is unenforceable in opt-out collective proceedings pursuant to section 47C(8) of the Competition Act 1998. Nevertheless, the CAT's general belief that collective actions of this kind would be "impossible" without third-party funding led it to conclude that, in circumstances where opt-in proceedings are otherwise preferable, such arrangements should not preclude granting an order. 

It remains to be seen whether the certification of RHA's claim, and those other claims which are funded in the same way, will withstand the judicial scrutiny of the Supreme Court in due course. 

With thanks to Imogen Chitty of Ashurst for her contribution.