Green light for mass claim against BT lets talk about collective actions

In a significant recent judgment, the Competition Appeal Tribunal (CAT) has granted a collective proceedings order (CPO) in a standalone opt-out claim for the first time (Justin Le Patourel v BT Group Plc and British Telecommunications Plc [2021] CAT 30). When it was handed down, the judgment was only the second competition claim, and the first standalone claim, to be certified to proceed as collective proceedings. The CAT has denied BT permission to appeal and it is understood that BT intends to seek permission from the Court of Appeal. 

Mr Le Patourel’s claim against BT concerns the alleged abuse of a dominant position by BT in charging excessive prices to approximately 2.3 million of its landline customers in the UK. Coming soon after Merricks (Walter Hugh Merricks CBE v Mastercard Incorporated and others [2021] CAT 28), it is yet another sign that the emerging collective proceedings regime in the CAT is gathering pace. 

Drawing the certification battle lines

Following the Supreme Court's judgment in Merricks, the fact that the CAT certified certain aspects of the Merricks claim in August 2021 was unsurprising. Merricks was undoubtedly noteworthy as the first certification of opt-out collective proceedings granted by the CAT, but the BT CPO decision is significant for different reasons. 

For one thing, BT did not contest certification itself, but the certification on an opt-out basis. In other words, BT did not oppose the certification of Mr Le Patourel's standalone claim on an opt-in basis. BT's defence at this stage concerned the form of certification and the merits of the claim itself (see "Lack of regulatory findings" below). It will be interesting to observe the extent to which future CPO applications are opposed in a similar way.

BT also brought a cross-application for strike-out or summary judgment based on six objections to Mr Le Patourel's case. The Supreme Court in Merricks made clear that the CAT's merits assessment of the claim at certification stage should go no further than determining whether it has a reasonable prospect of success. In theory, the determination of BT's application is consistent with that guidance. It is notable, however, that 17 of the 42 pages of the CAT's judgment are devoted to the assessment of BT's six objections to Mr Le Patourel's case in order to determine its application. 

While this level of engagement may well have been necessary to dispose of BT's application, it remains to be seen whether the combination of a CPO application for a standalone claim with a strike-out or summary judgment application will, in the future, push the CAT closer to the mini-trial that the Supreme Court has discouraged. It will also be interesting to see whether cross-applications of this nature will become a common defence tactic in future CPO applications for standalone claims. For instance, it is noteworthy that the defendants in the two CPO applications relating to rail fares also sought summary judgment and strike-out (Justin Gutmann v London & South Eastern Railway Limited; Justin Gutmann v First MTR South Western Trains Limited and another). The CAT granted CPOs in those cases and dismissed the defendants' cross-applications on 19 October 2021.

Consideration of substantive claim

The CAT's judgment underlines the fact that proving that a claim has no reasonable grounds to be brought or has no real prospect of success is a high bar to overcome. 

This is unaltered by the fact that Mr Le Patourel's case rests on the allegation of excessive pricing by BT. As the CAT recognised, these cases are unusual in England and Wales because courts tend to be unwilling to substitute their own judgment on price control for that of sectoral regulators. However, the CAT recalled that, if the allegation is properly founded, there is no reason in principle why competition law cannot be applied, to the extent that it prohibits unfair pricing. 

The CAT also confirmed that the standalone nature of the claim, and presumably the type of conduct alleged, does not mean that a claimant has to discharge a higher burden in showing that there is a real prospect of success. 

Lack of regulatory findings

Follow-on damages claims are, in theory, an easier vehicle for collective proceedings to be certified given that liability is established through reliance on pre-existing regulatory findings that there has been an infringement of competition law. But Mr Le Patourel's claim is a standalone claim because, rather than being legally founded on a final decision handed down by a regulator, it relies for evidence on an Ofcom report.

In February 2017, Ofcom conducted a review into the market for standalone landline telephone services; that is, voice services not bundled with a broadband service. Ofcom's subsequent report set out concerns that BT held a dominant position and the lack of competition enabled it to maintain prices above the competitive level. In response, BT voluntarily committed to reduce prices and keep any increases in line with inflation each year. Ofcom accepted these commitments in place of making any binding decision of its own.

Two of BT's six objections concerned the nature of the Ofcom report, namely that: 

• Its findings were concerned with Ofcom's role as price regulator under the Communications Act 2003, as distinct from the analysis of abuse of dominance required by section 18 of the Competition Act 1998.
• The Ofcom report was provisional and no formal determination was made.

The CAT unanimously rejected both of these points. While it recognised the contextual distinction raised by BT, it saw no bar to Mr Le Patourel's claim in circumstances where it was relied on as evidence, rather than as legal foundation. On the second point, the CAT reasoned that this would only assist BT if it could be said that no real weight could be attached to the report at all, which it termed "a hopeless submission".

The CAT's judgment therefore does two things: firstly, it establishes that the standalone nature of a claim is not itself relevant when determining a CPO application; secondly, it confirms the CAT's willingness to give evidential weight to regulatory findings that are not capable of being the legal basis of the claim. This slight blurring of the line between follow-on and standalone claims has the potential to encourage similar claims where other market reviews or studies have been conducted. It remains to be seen whether this will be the case.

Vulnerability of the class an important factor 

BT did not resist the granting of the CPO on an opt-in basis, where class members would have to actively sign up to the claim, but did resist the granting of the same on an opt-out basis, where class members would not have to sign up other than for the purposes of the distribution of damages. The CAT clarified that where a proposed class representative seeks certification on an opt-out basis only, they will still need to satisfy the CAT that an opt-out action is more appropriate than an opt-in action, by reference to the factors in its 2015 Guide to Proceedings, which include the strength of the claim. 

Interestingly, the CAT's decision to allow Mr Le Patourel's claim to proceed on an opt-out basis appeared to turn on the demographic composition of the potential claimant class, which comprises primarily older and less market savvy customers. In the judgment, the CAT emphasised the difference in attitude of a class member who opts in to proceedings, as opposed a member who has not opted out.

In the former case, the CAT was persuaded that a member might be expected to have undertaken their own merits assessment before deciding to opt-in, which the demographic in this claim would be unlikely to do, particularly given the claim's technical nature.

The CAT's emphasis on this point is interesting. Indeed, it may be that the willingness and ability of classes of ordinary consumers to participate in litigation of this nature would often be low. While the demographic at issue in Le Patourel does appear to be particularly vulnerable, the CAT's broad interpretation of the "suitability and appropriateness" test has arguably widened the scope for opt-out claims in the future. 

Litigation funding for standalone claims

In the absence of regulatory findings to establish liability, which is obviously a more attractive prospect as a potential investment for litigation funders, the willingness of litigation funders to invest in these sorts of claims has been a noteworthy aspect of the emerging collective proceedings regime to date. Mr Le Patourel's claim is funded by Harbour Litigation Funding. The four CPO applications issued after Mr Le Patourel's claim also concern standalone claims and are funded, as are all the other CPO applications currently before the CAT. 

Third-party funding is likely to play an important role in many claims of this nature because the members of the class may not be able to cover the risk of adverse costs individually and the costs themselves may be significant. As the Court of Appeal and Supreme Court noted in Merricks, the power to bring collective proceedings was intended to provide a means of redress which could be facilitated by litigation funding.

It is relevant to note the CAT's sympathy with Mr Le Patourel's concern that, if the claim were certified on an opt-in basis, too few customers opting in would cause the claim to lose Harbour's support. This underlines that the availability of funding for potential future claimants will be a key consideration for the CAT. This is particularly the case since, as part of the assessment of whether to authorise an application to act as the class representative at the certification stage, the CAT will consider whether the applicant can act fairly in the interests of the class, including through management of the proceedings, which includes having access to sufficient funds.

CPO horizon scanning

We now have CPO judgments in both a follow-on and a standalone claim, albeit with specific facts, that have yielded considerable guidance on how these applications are to be assessed. On 19 October 2021, the CAT also granted CPOs in the two Justin Gutmann claims relating to rail fares.

There are nine other CPO applications pending in the wake of this judgment. Five of those precede Le Patourel, of which one is due to be heard on 29 November 2021 and the other four have been heard and await judgment (the UK Trucks Cartel Ltd v Fiat Chrysler Automobiles NV and others and Road Haulage Association Limited v MAN SE and others applications relating to the trucks cartel, and the applications in Michael O'Higgins FX Class Representative Limited v Barclays Bank PLC and others and Mr Phillip Evans v Barclays Bank PLC and others relating to foreign exchange). The four others against, respectively, Qualcomm, Apple, Govia Thameslink and Google, are yet to be listed. It will be interesting to see the extent to which the guidance in the various Merricks, and now the Le Patourel, cases is applied in these subsequent cases and, in turn, how quickly they are resolved.

It is notable that five CPO applications have been issued since the Supreme Court handed down judgment in Merricks at the end of 2020, all of them standalone. Based on Le Patourel and the apparent funding appetite for standalone claims, that trend may well be set to continue.

This article first appeared in the November 2021 issue of PLC Magazine. 

Authors: Tim West (Senior Associate), Max Strasberg (Senior Associate) and Imogen Chitty (Trainee Solicitor).