Opt-out Collective Proceedings: has the red carpet been rolled up?

In the wave of decisions that immediately followed the Supreme Court's judgment in Merricks v Mastercard Inc [2020] UKSC 51, the bar for the certification of opt-out collective proceedings appeared to be becoming lower and lower. More recently though, the CAT has demonstrated an increasing willingness to deploy its gatekeeper role and, as a result, we have seen more cases being refused certification or sent away for reconsideration.

Where did certification start, and where are we now?

Early certification decisions - anything goes?

The Merricks opt-out collective proceedings were issued in September 2016 on behalf of every UK consumer over 18. The CAT initially refused to certify the proceedings. It found that there was insufficient data available to reach even a “very rough-and-ready approximation” of the loss suffered by each of the approximately 46 million class members. The CAT’s decision was, however, overturned on appeal and the Supreme Court remitted the case back to the CAT, where it was certified. The Supreme Court emphasised the novelty of the collective actions regime and the fact that it is possible to move away from the strictly compensatory approach to individual damages provided there is an adequate methodology to determine aggregate damages. The Supreme Court also confirmed that there is no merits test beyond a strike out threshold at certification.

What followed was a series of certifications of opt-out proceedings in the face of differing levels of objection from respondents, and shrinking times between issue and certification. The Boundary Fares claims were certified as opt-out despite arguments that the allegations were too vague and lacking in particularisation. The Court of Appea l emphasised the importance of the CAT’s “vigilant gatekeeper role” but upheld the certification. Justin Le Patourel v BT was certified as opt-out in the face of arguments from BT that as almost every member of the class was contactable it should only be certified as opt-in. In Kent v Apple, the CAT certified the claims on the day of the CPO hearing. Coll v Alphabet was certified less than a year after it was issued.

Increasing use of gatekeeper role

Since that initial run of certifications, the CAT’s approach has demonstrated an increasing willingness to exercise its gatekeeper role. The first sign came in the two FX CPO applications brought on behalf of all entities who entered into relevant FX trades over the claim period. The claims each sought billions in aggregate damages for losses said to arise out of the FX cartels. The CAT looked in some detail at the methodology and the blueprint to trial and, without a strike out application having been made, considered whether the claim met the strike out threshold. The CAT concluded that it had “no doubt” that both claims could be struck out. However, it did not do so, and instead gave permission for the PCRs to reformulate the claims on an opt-in basis, despite the practical impact of that being that neither of the claims would be able to proceed (one of the reasons previously given by the Court of Appeal in favour of certifying the BT claim as opt-out). In Gormsen v Meta, the CAT refused to certify the claim. It found that the PCR’s proposed expert methodology was insufficient, with no clear counterfactual for each of the alleged abuses. Accordingly, there was no effective “blueprint” through to trial. The claim was also better articulated as a consumer claim and not appropriate to certify as proceedings for a breach of competition law. The PCR was given six months to amend her claim and set out a new, and better, blueprint through to trial.

Shortly after that judgment, the CAT declined to certify Mr Gutmann’s claim against Apple. Instead, it adjourned the question of certification and invited the PCR to make an application for disclosure to enable him to plead his case with more particularity. In a similar approach to Gormsen, the CAT also refused to certify four applications for collective proceedings (two opt-in and two opt-out) against Visa and Mastercard and ordered a stay for the PCRs to seek to address the issues with their applications. The CAT found that the methodology requirements were not met – which it considered a “material and serious defect”. In addition, the way the opt-out claims had been formulated meant that many potential class membe rs would not be able to determine whether or not they were within the class. The judgment was also one of the first to cast doubt on the appropriateness of the PCRs.

Where is certification now?

After the initial flurry of certifications, the more recent decisions of the CAT could lead to the view that it is now taking a firm approach to its gatekeeper role. However, that the Court of Appeal has now overturned the CAT’s decision in Evans v Barclays Bank PLC & Ors, ruling that the claim should proceed as opt-out and, following the disclosure and reformulation of his claim, Mr Gutmann’s claim against Apple has also now been certified.

A novel regime like the collective proceedings was always going to be the subject to testing and to be shaped by the CAT and the appeal courts. This apparent back and forth in approaches to certification shows the collective proceedings regime, and the CAT’s role as gatekeeper within it, developing as the number of cases grow and parties increasingly seek to test the bounds of the regime. One noteworthy development is the way in which certification has developed into an iterative process, where claims that are not certified are given the opportunity to be revisited and improved in order to meet the certification bar. No doubt, that trend will continue.

First published in Thought Leaders for Competition’s Magazine Issue 3 – A Year in Review of Competition Law and Litigation.