The new Competition Appeal Tribunal Fast-Track Procedure for Small-and Medium-Sized Enterprises. On October 1, 2015, significant competition law reforms took effect in the United Kingdom under the Consumer Rights Act of 2015. In addition to providing for opt-out collective (class) actions for competition claims, the reforms also include provisions establishing a new fast-track procedure (“FTP”) for competition damages claims brought before the Competition Appeal Tribunal ("CAT"). Importantly, the new FTP could facilitate the ability of small- and medium- sized enterprises (“SMEs”) that are alleging an abuse of dominance to seek injunctions against large corporations, thereby posing significantly increased litigation risks for potential defendants.
The new rules allow the CAT to order that competition proceedings are, or cease to be, subject to the FTP at any time, either following an application of a party or on its own motion. In practical terms, the allocation of proceedings to the FTP will have three key consequences: (1) the main substantive hearing will be fixed to commence as soon as possible following the CAT’s order—and in any event within six months (2) recoverable costs will be capped at a level to be determined by the CAT and (3) the CAT will have the power to grant an interim injunction without requiring (or by capping) a cross undertaking as to damages.
Types of claims that may be allocated to the FTP. While the FTP is not expressly limited to claimants of any particular size, its stated purpose is to enable simpler cases brought by SMEs to be resolved more quickly and at a lower cost. When deciding whether to allocate a proceeding to the fast track, the CAT will likely take account of all factors it considers relevant, including as a threshold matter, whether one or more of the parties (i.e., potentially only the claimant) is an individual, a micro enterprise, or an SME. The other factors the CAT will likely take into account when making this determination are:
- whether the final hearing is estimated to take three days or less;
- the complexity and novelty of the issues involved;
- whether any additional claims have been or will be made in accordance with rule 39 (i.e., counterclaims and additional claims for - contribution and indemnity);
- the number of witnesses involved, including expert witnesses, if any;
- the scale and nature of the documentary evidence involved;
- whether any disclosure is required and, if so, the likely extent of such disclosure; and
- the nature of the remedy being sought and, in respect of any claim for damages, the amount of any damages claimed.
Bearing in mind these factors—in particular, the length of the hearing, complexity, number of witnesses involved, and disclosure—the types of conduct that seem to lend themselves more readily to claims under the FTP are abuse of dominance cases, such as predatory pricing, refusals to deal, and tying or bundling claims. In practice, the procedure is expected to be used to restrain abusive conduct of this sort through injunctive relief. Moreover, despite their complexity, these types of claims are less likely to involve extensive witness evidence and disclosure than allegations against multiple defendants in respect of anticompetitive collusion. However, even with less complex competition litigation matters, resolving claims within a six-month timetable (compared to the average competition claim, which often requires at least 12 to 18 months) is more likely to result in a system of “rough and ready,” rather than perfect, justice.
Practical and strategic considerations. The new FTP procedure may offer a significant advantage to claimants, who typically have as much time as they need to prepare their arguments in advance, to gather evidence, and to decide when to file a claim. By contrast, a defendant may not have much, if any, advanced notice of the claim and thus may find itself quickly on the back foot. If a claim is then ordered to proceed under the fast track from the first case management hearing, the defendant will have less than six months in which to prepare a reasoned and robust defence—a daunting challenge for any legal team. Irrespective of the particular merits of any action, large companies will want to avoid the risk of being tagged as dominant because of the implications that such a finding carries, in particular in terms of restricting its conduct. Defendants faced with a fast-track claim will therefore need to defend the claim in the manner that they would defend an investigation by a competition authority, which can take years and involve substantial volumes of evidence.
The new FTP procedure presents other significant advantages for claimants as well. For example, the cap on recoverable costs under the FTP is to be set by the CAT on a case-by-case basis, and figures as low as £25,000 have been suggested. Having a case against a large multinational allocated to the fast track may therefore be advantageous for a claimant in terms of limiting the usual risks of exposure to adverse recoverable costs that are associated with the loser-pays rule in English litigation. This limited exposure may be particularly attractive where the claimant is less than confident of success, thus presenting a potential risk that more speculative actions will be filed under the new rules. In practice, however, the earliest stage at which the parties will know whether the claim may be fast-tracked and what the level of the cap on costs will be is the first case management conference. By that time, the parties may have already incurred significant costs and adverse costs exposure, and the cap will likely apply to those costs incurred prior to the FTP determination.
The FTP may also be attractive to claimants who seek to obtain an interim injunction, given that allocation to the fast track will require only a capped (or possibly no) cross-undertaking as to damages. This has the potential to limit—or even eliminate—one of the major disincentives claimants face when seeking an injunction to restrain alleged abuses of dominance.
With these considerations in mind, the new FTP presents SMEs with significant opportunities to take action against suppliers that they consider are imposing unreasonable terms. The new procedure thus exposes large companies to the risk of strategic litigation on the part of their customers who desire better commercial terms. It also poses a risk that a large company may encourage SMEs to pursue fast- track claims against one of its large competitors and, in so doing, force that competitor to change its commercial practices to the benefit of the large company instigating the litigation. Companies with a large market share that could cross the threshold for dominance need to be aware of this risk and determine whether to take proactive steps to be able to defend any fast-track claims properly.
The First FTP Application. The first application for designation to the FTP was made in a claim lodged on December 17, 2015 by the National Compliance & Risk Qualifications against the Institution of Occupational Safety and Health, alleging an abuse of dominance by a failure and refusal to grant accreditation for its qualifications. The claimant sought damages and an interim injunction. However, before the injunction hearing scheduled for early January 2016 could take place or a ruling from the CAT on whether to allocate the claim to the FTP, the defendant agreed to the claimant’s demand for accreditation for a period of three years, and the parties settled.
Though much uncertainty remains about the new FTP procedure, one thing is clear: it offers SMEs a compelling basis for bringing their commercial counterparts to the negotiating table.