Private actions and public enforcement
Panel remarks by Sarah Cardell, CEO of the Competition and Markets Authority, at the Competition Appeal Tribunal’s 20th Anniversary conference on 4 May 2023.
Original script, which may differ from delivered version.
Introduction
As the principal public enforcer of competition law in the UK, the CMA has a central interest to ensure that the enforcement regime as a whole works effectively to deter anti-competitive conduct, to hold to account those parties who breach the law and to ensure that those parties who suffer loss as a result of such conduct can obtain redress.
While the CMA principally discharges its functions through public enforcement, this does not stand by itself as the only deterrent from breaching competition law. Private enforcement, whilst aimed at compensating those harmed from breaches of competition law, can also have a deterrent effect.
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private enforcement can increase the breadth of cases through which enforcement activity of some kind is pursued, and increase the costs of infringing competition law
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the opportunity for redress can incentivise third parties to bring potentially anticompetitive conduct to light
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private enforcement can increase and refine the body of precedent available to businesses seeking to comply with the law and improving legal certainty
In turn, public enforcement is also an enabler of private enforcement, to the extent that a public enforcement process can confer on claimants the advantages of making a ‘follow-on’ claim. It follows that public and private enforcement are both important parts of the UK’s single overall competition law regime. When they work well together, the regime as a whole can be strengthened. And of course, at the CMA, we support the basic principle underlying private enforcement that those who suffer harm from breaches of competition law should obtain effective redress.
In recent years, the private enforcement of competition law in the UK has steadily been on the rise, through a mixture of private damages actions following-on from competition law infringement findings, and standalone actions, particularly, through collective proceedings. At the same time, the demands on the CMA are possibly at an all time high, including given the impact of Brexit on the scale and scope of our competition law enforcement responsibilities.
Given these developments, I want in my remarks today to talk a little about the CMA’s part in ensuring the relationship between public and private enforcement works well in the future and how, more broadly, we can ensure that public and private enforcement work optimally alongside one and other to ensure that the enforcement regime as a whole functions as effectively as possible.
The CMA’s role
I want to touch on 2 particular aspects of the CMA’s role in public and private enforcement working well-together.
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first, I want to talk about the role that private enforcement may play in our own selection and prioritisation of cases for public enforcement
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second, I want to talk about how the CMA plans to engage with private enforcement that is under way
Case selection
In relation to case selection, the complementary nature of private actions and public enforcement can be highly relevant. The CMA has finite resources; which it has to deploy across all of its non-discretionary and discretionary tools. For the public enforcement of competition law, we prioritise cases that we believe will generate the most impact and carry the greatest strategic significance in terms of the benefits that are expected to be felt by people, businesses and the UK economy.
If there is a prospect that a particular private action will overlap to a material degree with a potential public enforcement case, this will be a relevant factor in our assessment of where our resources can be put to most effective use. For example, when deciding between which of 2 potential public enforcement cases to launch, if one of the cases overlaps with an existing or prospective private action, we may take that into account in our prioritisation decision, potentially leading us to launch public enforcement in the case with no overlapping private action.
However, the overlap with a private action will always just be one factor amongst the range of other considerations we take into account when deciding how to use our resources. Indeed, there may well be cases where, notwithstanding overlapping private enforcement, public enforcement would achieve outcomes which justify the CMA taking action in parallel.
For example. there may be particular value in the CMA setting out our approach to certain cases where we can draw from our perspective as the economy-wide competition regulator. In terms of deterrence, the CMA can impose financial sanctions. Censure by an authority acting in the public interest may also have an important role in deterrence. A public enforcement process may also put the CMA in a stronger position to seek orders disqualifying individuals from acting as company directors.
In discussing the selection of public enforcement, we should also bear in mind that there is a process of ‘case selection’ which takes place in respect of private enforcement. Indeed, a striking feature of the collective proceedings currently before the Tribunal is the number which are backed - and to some extent made possible - by litigation funding firms.
These firms represent ‘investors’ in litigation. Their interest is, naturally, in making a return on their investment. And the ability for a third party to make such a return can play a role in providing access to justice.
However, these funding arrangements may encourage private enforcement to focus its attention in certain areas. Namely, those cases where funders anticipate the largest returns. It may, therefore, be more likely that private enforcement (and especially collective proceedings) will focus on conduct which has allegedly caused significant and/or widespread harm by a defendant with deep pockets. The consequence may be that abuse of dominance claims are more likely to be ‘selected’ by funders for standalone collective actions and that, absent public enforcement, private enforcement action by default sets the development of competition law policy in these cases.
Given the CMA’s central interest in effective competition law policy as a whole, which includes the development of the law, and the fact that it will also look at the likely harm caused by the conduct in deciding whether to prioritise enforcement action, there may well be circumstances where there is some overlap in the types of cases that are taken forward in public and private enforcement. Giving too much weight to the presence of private enforcement in our case-selection would risk any biases in the focus of private enforcement having systematic effects on the overall balance of public enforcement.
Intervening in private proceedings
Under the Tribunal’s rules, the CMA can intervene in proceedings to submit written observations to the Tribunal on issues relating to the application of Chapter I or II of the Competition Act 1998. With the permission of the Tribunal, the CMA may also make oral observations.
Given the growing trend of private actions, and the overall complementary pursuit of deterring anti-competitive conduct, the CMA regularly monitors private actions to consider the merits of interventions. The CMA has now intervened in 5 private competition law proceedings, all of which are current cases before the Tribunal.[1]
I want to provide some more colour on the different scenarios in which we might consider intervening in proceedings.
Concurrent cases
The first and most obvious case will be where the Tribunal is considering conduct which is the same or closely related to conduct under consideration by the CMA in ongoing or anticipated public enforcement. This raises certain risks for the CMA’s public enforcement, including the possibility that the Tribunal will come to consider the merits of a private action before, or around the same time as, the CMA issuing a decision on similar or related issues. This could lead to the potential for diverging positions, and the inefficient and duplicative use of public resources. Intervening in proceedings allows the CMA to manage these risks.
To give an example, the CMA intervened last year in the collective proceedings against Apple alleging an infringement of the Chapter II prohibition on the basis of Apple’s terms for the distribution of mobile apps via its ‘App Store’.[2] Part of the CMA’s rationale for intervention was that the collective proceedings involved issues which were similar to those arising in our mobile ecosystems market study and our ongoing investigation under Chapter II of the Competition Act in relation to the distribution of apps on iPhones and iPads.
Related cases
The second case is where the conduct may be distinct from the subject of any anticipated or live public enforcement, but the Tribunal will nevertheless be considering a point of law which is directly relevant to the CMA’s anticipated, ongoing or past enforcement activities.
Last year, the CMA submitted written observations to the Tribunal in collective proceedings against BT. The class representative alleged that BT had charged unfair prices to certain customers, in an infringement of the Chapter II prohibition.[3] The CMA’s decision to intervene reflected our particular interest in the proper application of the test for unfair pricing, having adopted 3 recent infringement decisions which found unfairly high prices for 3 pharmaceutical products.[4]
Wider interest
The third case is where the Tribunal will be considering an issue which has material consequences for the CMA’s role as the public enforcer of competition law, or the development of competition law more generally. For instance, the Tribunal may be considering a novel interpretation of the Chapter I or Chapter II prohibitions. Alternatively, the Tribunal may be considering whether or not it is appropriate to depart from decisions of the European courts. We may, in our role as a public enforcer, be in the position to give assistance the Tribunal beyond what the private litigants are able to provide.
The CMA will give careful consideration to whether it is in the public interest and a good use of taxpayers’ money for it to intervene in a private action. When intervening, the CMA will not support one side or the other, but expects to adopt a neutral position focussing on the relevant legal test, case law, and applicable legal principles. It is ultimately for the Tribunal to determine whether the claimants’ case is made out.
In addition to the substantive application of competition law, there is a separate question in cases where public and private enforcement are considering the same or similar conduct of whether the progress of either case should materially determine the other. Should one case pause, while the other is completed? In general, we do not consider that it is necessary or appropriate for the progress of either the public or private enforcement case to materially determine the other. The CMA is therefore unlikely to provide views to the Tribunal on how it should exercise its case management functions in this regard. That said, where the CMA’s investigation is at a late stage, this may be a factor that is relevant to the Tribunal in determining the appropriate progress of the private action.
The certification of collective proceedings
The Tribunal has an important ‘gatekeeping’ role in collective proceedings. These claims cannot be brought as of right. At the start of the claim, at what is referred to as the ‘certification stage’, the Tribunal must grant a collective proceedings order in order for claims to go ahead. The Tribunal may in addition withdraw its certification of the proceedings, at any subsequent point.
The CMA could – in principle - intervene at this certification stage, to assist the Tribunal in its application of the statutory test for whether the claims should be allowed to proceed. There may be circumstances where we consider it appropriate to intervene in collective actions at the CPO stage, and the CMA will keep this possibility under active consideration.
However, we have not intervened or otherwise given a view to the Tribunal on certification to date. This reflects a deference to the rights of the applicants to seek access to justice, and to the Tribunal’s expertise to rule on the procedural issues before it. Furthermore, the Tribunal’s role at certification does not typically involve any definitive or detailed consideration of the merits of the claim, and therefore issues around the application of the Chapter I or Chapter II prohibition in relation to which the CMA has a particular interest do not arise in the same way at this stage.
Conclusions
We are still only at the start of seeing the impacts of the reforms introduced by the Consumer Rights Act 2015. Although the number of collective proceedings has grown rapidly, no case has yet gone to trial. The CMA will need to refine its role as the private action regime continues to evolve, but I am pleased to be able to share some of our current thinking and participate in this wider discussion.
I want to close by emphasising that the CMA sees public and private enforcement as 2 complementary parts of a single overall regime. We want to ensure that our approach as the public enforcer of competition law is adapted to the increasing levels private enforcement, both in terms of where we focus our public enforcement efforts and how we engage in private enforcement underway.
We are therefore keen to engage with those involved in private enforcement to understand their perspectives on how public and private enforcement should work together. We recognise the opportunities this offers to strengthen the competition regime as a whole.
[1] A register of cases in which the CMA has intervened are published on the CMA’s website, alongside details on how and when parties to private competition law litigation should serve documents on the CMA: Service of documents on the CMA in court proceedings relating to competition law - GOV.UK (www.gov.uk)
[2] Dr. Rachael Kent v Apple Inc. and Apple Distribution International Ltd Case 1403/7/7/21
[3] Justin Le Patourel v BT Group PLC Case 1381/7/7/21
[4] The 3 cases are the CMA’s decision of 15 July 2021 in relation to hydrocortisone tablets (case 50277), its decision of 29 July 2021 in relation to liothyronine tablets (case 50395) and its decision of 21 July 2022 in relation to phenytoin sodium capsules (case 50908)