From fast track to gridlock: The Competition Appeal Tribunal faces its toughest test yet
The Competition Appeal Tribunal (CAT) is by far the busiest courtroom in the City, with backlogs and organisational issues rippling through the institution.
Just over ten years ago, legislation allowing the ‘opt-out’ regime for competition law was enacted, and despite a slow start, cases have since flooded the Tribunal.
Claimant law firms and their funders had an appetite for new cases, often targeting major tech companies. As a result, announcements of class actions worth millions of pounds dominated the headlines.
The flood of cases was helped by the Tribunal being known for its ‘low bar’ when certifying a case.
“The regime has moved in unforeseen directions, with a significant focus on exploitative abuses of dominance which stray into other areas of the law, including consumer law, data and privacy,” explained Jess Steele, partner at Freshfields.
Despite the legislation being around since 2015, the CAT has, to date, only produced one class action trial judgment. With a surge of new cases being launched, the workload at the Tribunal soon began to expand, and the time it took to process cases increased.
An approach issue
“As more class actions go to trial and judgment over the next year, the regime will be under scrutiny,” said Ed Coulson, partner at Hogan Lovells.
The main issues with the CAT are how it manages cases, problems around the shape of substantive trials, and key pivot points such as settlements.
The former president of the CAT, Mr Justice Marcus Smith, faced numerous criticisms from lawyers regarding his handling of case management and his ‘overly innovative’ approach to procedure.
However, he was also causing problems behind the scenes. The High Court judge was reprimanded last August for sending a written letter to a junior staff member in which he stated he loved her.
Following this revelation, he stood down from his role at the CAT last October.
Mrs Justice Kelyn Bacon was selected to serve as the new president, and the changing of the guard saw an aura of positivity on the idea of change at the competition-focused Tribunal.
Already, she has shown that she has a higher standard, having dismissed a class action against Apple and Amazon because she deemed the class representative unsuitable.
Jessica Radke, senior counsel at Linklaters, noted that prioritising claims to run through the process efficiently “is important to ensure all parties continue to have faith in the CAT and to ensure that less meritorious claims are dealt with quickly.”
Litigation funding hiccups
Despite the rush to launch new competition class actions through the Tribunal, the litigation funding industry has faced several hurdles over the past few years.
In 2023, the Supreme Court ruled in a case (PACCAR) that the litigation funders backing the claims did not have the proper financial arrangements to support the actions adequately.
This decision threw the litigation funding industry into a state of uncertainty, prompting the sector to lobby both the previous Conservative government and the current Labour government. These efforts had some success as the Litigation Funding Bill was drafted, but with the change of government the Bill was put on the back burner where it will remain until later this Summer.
Earlier this month, a long-awaited report by the Civil Justice Council called for a ‘light-touch’ set of statutory regulations for the third-party sector to be overseen by the Lord Chancellor.
Additionally, after a decade in court, the Walter Merricks versus Mastercard case was settled for £200m, despite initially being valued at £10bn.
The settlement caught its litigation funders, Innsworth Advisors, off guard, leading them to challenge the settlement and attempt to seek damages from the class representative.
Andrew Leitch, partner at Hogan Lovells pointed out, “The reality is that without significant investment and risk taking from funders, collective actions would not get off the ground.”
“The president’s views on how much funders should be rewarded for taking those risks when cases succeed will be influential on whether funders continue to invest with the same enthusiasm as we have seen so far,” he added.
On the horizon
The third-party funder sector is facing potentially multiple rounds of rule changes on funding before the position is settled. “More and more, everyone is thinking about what happens next with litigation funding,” stated Radke.
She added, “One way things will change is when we start seeing more judgments and that informs whether funders’ appetite changes.”
However, in the background, pressures on capacity may continue to creep up on the CAT.
“The CAT’s caseload continues to increase and is likely to do so further as we start to see the impact of the Digital Markets, Competition and Consumers Act 2024, which introduced a right to claim for damages in the CAT for breach of the new digital markets regime,” explained Steele.
But there is still uncertainty around this as Leitch pointed out that “a number of funders have indicated they are pausing investments in new cases whilst they see how the current cases play out.”
But one thing is clear: under growing pressure and scrutiny, all eyes will be on Mrs Justice Bacon to steer the CAT through its most transformative period yet.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.