Digital Markets, Competition and Consumers Bill amendments could lead to more mass actions

The proposed amendments are relevant to two aspects of class and collective actions in the UK: third party funding of mass actions and the availability of ‘opt-out’ collective action procedures, which allow one party to bring a claim on behalf of an entire class of claimant, without the express mandate or even knowledge of each member of that class.

Alan Davis and Emilie Jones of Pinsent Masons said while so far only the third party funding amendment has been added to the Bill, consumer-facing businesses who want to understand their exposure to mass claims should follow the progress of the legislation. 

“Businesses should watch closely the progress of this Bill as it will have an impact on how easy it is for claimants to fund and pursue mass actions. In particular, consumer-facing businesses of all sizes, and not just those who might have a dominant position so as to be exposed to stand-alone abuse of dominance proceedings in the Competition Appeal Tribunal, should track developments in relation to any proposed expansion of the mass action regime,” said Jones, a litigation expert.

The changes in relation to third-party funding provide that the 1998 Competition Act should be amended so that a litigation funding agreement would not count as a damages based agreement (DBA) in the context of opt-out collective proceedings (CPOs) in the Competition Appeal Tribunal (CAT). At present, the Competition Act completely prohibits the use of DBAs in opt-out collective proceedings in the CAT. The change would mean ‘opt-out’ mass actions could be funded by third party litigation funders in competition law claims.

This amendment would address some of the issues facing third party funders and claimants following the landmark PACCAR judgment by the Supreme Court in July. Here, the court decided that commercial third party litigation funding agreements which provide for the funder’s return to be calculated by reference to a percentage of the damages or settlement sum obtained by the funded claimant were DBAs. This type of funding model has until recently been common in the litigation funding market. 

The effect of the ruling is that all litigation funding agreements structured in this way have to comply with the requirements set out in the 2013 DBA Regulations. Many existing funding agreements are not currently compliant. As DBAs, this type of agreement is completely prohibited in opt-out collective proceedings in the CAT under the Competition Act. The only opt-out mass actions procedure in the UK is for competition law claims under this regime in the CAT and there has been a rapid growth in the volume of these claims, which involve a diverse range of industry sectors and increasingly novel competition law arguments.

There have, however, been some criticisms over the limited scope of the DMCC Bill amendment. It would only mean that the absolute bar on DBAs in opt-out CPOs in the CAT would not apply to third party funding agreements; it would not address the PACCAR judgment’s categorisation of third party funding agreements as DBAs in any other context.

There is still a possibility that as the DMCC Bill continues its passage through Parliament, further amendments could be introduced to the Bill to widen this ‘anti-PACCAR’ clause. Last week, in a debate in the House of Lords, Lord Sandhurst argued for a wider anti-PACCAR amendment to the Bill and announced that he will be proposing an amendment to this effect and has provided a draft to the government. Lord Sandhurst said that group actions are brought in the High Court as well as the CAT, and on an ‘opt-in’ as well as an opt-out basis. He argued that the issues created by the PACCAR decision around the funding of actions need to be addressed for the purposes of all proceedings, not just opt-out CPOs in the CAT.

Alternatively, other legislation could be used to provide a wider response to the PACCAR judgment. Viscount Camrose, a government minister, stated in the House of Lords that the Ministry of Justice is “actively considering options for a wider response”, but that he was “advised that this Bill is not the appropriate vehicle to deliver this aim”.

Other proposed amendments to the DMCC Bill, if passed, would bring into the CAT CPO regime claims under the consumer law claims part of that Bill, Part 4. That means the CAT CPO regime, which offers an opt-out procedure, would no longer be limited to competition claims. “If passed, this could be a significant widening of the availability of opt-out class action procedures in the UK,” said Jones.

This amendment was not added to the version of the Bill which proceeded from the House of Commons to the House of Lords, but it remains procedurally possible for an amendment to a Bill to be re-tabled at House of Lords stage. 

During the House of Lords debate last week, Lord Etherton urged the government to make provision in the Bill for a wider collective actions regime.

“It is possible therefore that we have not seen the end of attempts to use the DMCC Bill as an opportunity to expand the availability of opt-out class actions procedures in the UK to cover some consumer claims beyond competition law breaches,” Jones said.

While the proposed changes may be a positive development for litigation funders and claimants, competition law expert Alan Davis said the government should give “very careful consideration to a wide range of factors in considering whether to extend the CPO regime in this way”. 

“The regime is currently designed for competition law claims and it is not immediately clear how it could simply be extended to cover a different category of claims. In addition, the CAT’s CPO regime has been seen by many as a ‘pilot’ for opt-out mass actions in the UK, and there is some way to go before the success of the regime can be assessed,” he said.

“In particular, it is unclear the extent to which the regime delivers effective redress to those affected. That will depend in large part on how much take-up there is by class members of any entitlements to damages or settlement sums paid by defendants to class representatives in opt-out proceedings, and the effectiveness of the mechanisms for distributing damages,” he said.

Since settlements are only now starting to be reached in collective proceedings before the CAT, Davis said, pointing to a recent settlement (22-page / 348KB PDF), it remains “very early days” in terms of starting to assess the success of the regime.

The DMCC Bill aims to introduce a suite of reforms to UK laws on digital markets, competition and consumer law. The Bill is currently going through Parliament and had its second reading in the House of Lords on 5 December.  It will now proceed to committee stage – line-by-line examination of the Bill - in the House of Lords. It has been expected that the Bill will be in final form by Autumn 2024 with an aim for it to come into force by Spring 2025. This is, however, subject to the timing of the next general election.