Competition Appeal Research Articles

The Ruling of the UK Competition Appeal Tribunal in Ping v Competition and Markets Authority

In this issue, the Journal of Antitrust Enforcement introduces a new section discussing recent developments in competition law enforcement. This first commentary session explores the significance of the UK Competition Appeal Tribunal (CAT) holding in Ping Europe Ltd v Competition and Markets Authority. This ruling is the first word of the CAT on the admission of new evidence in appeal proceedings based on rule 21(2) of the CAT Rules 2015. Renato Nazzini and Despoina Mantzari explore the ruling and its policy and practical implications, each from a different perspective offering both a positive and negative account. Nazzini’s comment explores the asymmetric rule set by the ruling in a two-tier administrative system concluding that ‘the approach of the CAT in Ping is, essentially, correct’, while Mantzari’s observations focus on the balance between the rights of defence and effective competition law enforcement arriving at the conclusion that ‘it is not for the CAT to usurp the role of the CMA as the primary fact-finder’. It is still rather early stages to evaluate the impact of the judgment, but the debate will continue and is likely to be fierce.

Credit Cards, Counterfactuals and Antitrust Damages: The UK MasterCard litigations

The English courts in Sainsbury’s v. MasterCard and Morrisons v. MasterCard came to opposite conclusions on the illegality of MasterCard’s multilateral interchange fees (MIFs). While both courts posited bilateral counterfactuals, the Competition Appeal Tribunal (CAT) in Sainsbury’s held that this was a realistic counterfactual and that MasterCard had infringed Article 101(1); while the High Court in Morrisons found that the bilateral counterfactual was not realistic because MasterCard would not survive if faced with competition from Visa’s higher interchange fees. The courts also used very different methods to calculate the counterfactual interchange fee. There is now considerable legal uncertainty facing claimants and MasterCard. Here a critical assessment of the reasoning underpinning the two judgments is undertaken. The central thesis is that the counterfactual approach is flawed because of the constrained nature of and procedural constraints arising in litigation.

What Standard for Excessive Pricing in EU law? A Discussion of the Competition Appeal Tribunal’s Judgment in the Pfizer/Flynn v CMA Case

What Standard for Excessive Pricing in EU law? A Discussion of the Competition Appeal Tribunal’s Judgment in the Pfizer/Flynn v CMA Case

The United Kingdom’s New Opt-Out Class Action

On 1 October 2015, a sea change in English civil procedure occurred, when the UK’s first opt-out class action regime took effect. Its drafting choices occurred against a backdrop of considerable comparative jurisprudence from Australia, Canada and the United States. For example, the regime’s flexible standing provisions avoid difficulties that have arisen in class action regimes in other jurisdictions, by enabling a class action to be brought either by a directly affected class member as representative or by a suitable representative who has no cause of action. On the other hand, the preliminary merits criteria which the class representative will need to prove are far-reaching and more onerous than those implemented elsewhere. In the first certification decision delivered under the regime—a moment of history created on 31 March 2017—the Competition Appeal Tribunal has made it plain that comparative insights will be highly relevant. This article analyses that milestone event, by examining this first decision in light of the drafting choices made under the UK regime, whilst also suggesting further ways in which comparative law may be helpful on key interpretive words and phraseology in cases to come.

Credit Cards, Counterfactuals, and Antitrust Damages - The UK MasterCard Litigations

The English courts in Sainsbury’s v. MasterCard and Morrisons v. MasterCard came to opposite conclusions on the illegality of MasterCard’s multilateral interchange fees (MIFs). While both courts posited bilateral counterfactuals, the Competition Appeal Tribunal (CAT) in Sainsbury’s held that this was a realistic counterfactual and that MasterCard had infringed Article 101(1); while the High Court in Morrisons found that the bilateral counterfactual was not realistic because MasterCard would not survive if faced with competition from Visa’s higher interchange fees. The courts also used very different methods to calculate the counterfactual interchange fee. There is now considerable legal uncertainty facing claimants and MasterCard. Here a critical assessment of the reasoning underpinning the two judgments is undertaken. The central thesis is that the counterfactual approach is flawed because of the constrained nature of and procedural constraints arising in litigation.

Private Antitrust Enforcement in England and Wales after the EU Damages Directives: Where are We Heading?

The framework for private antitrust actions in the England and Wales has undergone a number of changes in recent years. The Consumer Rights Act 2015 introduced measures to facilitate access to justice for victims of anticompetitive conduct. It created a fast track procedure in the Competition Appeal Tribunal and granted the Tribunal the powers to permit opt-out representative actions. More changes were brought on with the implementation of the EU Damages Directive in March 2017. In this chapter, I will take stock of those recent developments and offer an insight into the functioning of private enforcement of competition law in England and Wales. I will document key developments and issues regarding access to documents (disclosure), joint and several liability of co-infringers, and claim aggregation (opt-out representative actions). The recent legislative measures seem to pull private enforcement of competition law in different directions facilitating both small claims and large compensation actions. The Consumer Rights Act implemented a number of measures to encourage private litigation but the impact of the changes following the Damages Directive are not clear yet.

The Law and Economics of Pass-On in Price Fixing Cases

Sainsbury’s v. MasterCard establishes the pass-on “defence” in English/UK law. The Competition Appeal Tribunal set out a two-part test which it erroneously distinguished from the economists’ notion of pass-on. It then went on the develop key elements of legal test for pass-on in price fixing cases. This article critically assesses the Tribunal’s judgment within a law and economics framework. It provides a rounded interpretation of pass-on as both a defence and offence, the different evidentiary standards and principles used, and the potential for inconsistency which could see defendants liable to claims more than the overcharges.

Driving with the Handbrake On: Competition Class Actions under the Consumer Rights Act 2015

This paper examines the new class action procedure for competition cases established by the Consumer Rights Act 2015. It examines whether the legislation and the procedural rules for the Competition Appeal Tribunal address the failures of previous procedures, focusing on three issues in particular i) the treatment of conflicting interests amongst class members ii) the rules on certifying collective proceedings; and iii) rules on funding. It argues that while the Act is a considerable improvement on what preceded it, the safeguards adopted will act as a drag on meritorious and unmeritorious claims alike, and as such there is likely to be continued under‐enforcement of competition law.

About a Boy: A Gamer and L2 English Speaker Coming into Being by Use of Self-Access

This is an interview study of Eldin, a 14-year-old Bosnian boy living in Sweden since the age of six. The aim is to investigate how Eldin became a gamer and how he, strongly motivated, learned foreign/second (L2) English mainly through self-access gameplay. Using language learning motivation theories, Dörnyei’s (2005, 2009) L2 Motivational Self System and Dweck’s (2006) concept of mindsets, the questions are: (i) By whom and at what age was the learner introduced to video games?, (ii) What was it about the games that kept the learner motivated for two years before he started to play ‘for real’?, and (iii) How does the learner himself describe his process of language learning? Data consist of an in-depth interview and three university-level vocabulary/multiple-choice tests measuring English proficiency. Guided by the questions, interview data were analyzed qualitatively. Eldin’s mindset seems to favor naturalistic language learning, matching his interest in gaming. Experiences of having fun and daring to use ‘trial-and-error’ in gaming have contributed to his English proficiency, which is equivalent to a passing grade at second-semester university level. Elements of gaming (in particular, competition, stories, and escapism) appeal to Eldin, thereby indirectly contributing to his successful learning of English.

The Consumer Rights Act 2015 and collective redress for competition law infringements in the UK: a class act?

This article is the first in-depth academic discussion of the key aspects of the enhanced collective redress mechanisms introduced recently in relation to competition law infringements in the UK by the Consumer Rights Act. The legislation is a particularly significant development because of the historical and contemporary focus on the ‘consumer’ at the heart of competition/antitrust law and because the reforms also reflect more recent debates generally in legal practice about ‘access to justice’. The article first recounts the pivotal role played by ‘class actions’ in US antitrust enforcement before outlining the recent debate on encouraging and facilitating private enforcement in the EU, particularly in relation to collective redress, culminating in the (anodyne) Commission Recommendation of June 2013. As the article notes, most of the collective redress mechanisms introduced across the EU Member States to date have been opt-in models, but these have been criticised for their limited impact and effectiveness, and an opt-out representative model has been introduced in some Member States and discussed in others. The article will reflect on the limited provision in the UK on collective redress in relation to competition law infringements prior to the Consumer Rights Act, in particular the limitations in the opt-in follow-on procedure under s47B of the Competition Act 1998, as demonstrated by CA v JJB. The article will then focus on the Act’s provisions (and associated Tribunal rules) in relation to opt-in/opt-out collective proceedings and settlements (in both follow-on and stand-alone actions). The article will outline the new statutory provisions in sections 47B and 49A and B of the Competition Act 1998, for Collective Proceedings and Collective Settlements respectively. The Tribunal rules on certification will be considered, noting the potential difficulties in their practical application, before further analysis of two key problematic aspects of the proposed opt-out collective redress scheme, which may limit its effectiveness and uptake. The first concerns the appointment of the class/settlement representative and the second concerns the potential funding arrangements in relation to opt-out collective proceedings. The article questions whether the combination of these two aspects may dis-incentivise and unnecessarily limit the effectiveness of the new opt-out provisions, although it is accepted that this will also greatly depend on the Competition Appeal Tribunal interpretation and application of its new Tribunal Rules in relation to Collective proceedings, in particular regarding certification, appointment of the class/settlement representative and determination of the appropriate costs and expenses incurred in pursuing a collective claim.

A Short Note on the Smith Commission: Proposals to Devolve Broadcasting and Telecommunications to Scotland

The Smith Commission completed its work in short order, producing an agreement that would see significant further powers devolved to the Scottish government and parliament. Amongst the arrangements were some additional powers for the Scottish government concerning the work of the Office of Communications (OFCOM), the independent regulatory authority for broadcasting, posts and telecommunications. Additionally, a ‘formal’ role was proposed for the Scottish government in the consultations over the forthcoming renewal of the BBC Charter. The Scottish Parliament is to have annual reports of BBC Trust and OFCOM laid before it, though it already receives these.Whereas, the Smith Commission omitted the appointment by Scottish ministers directors to important bodies, such as the Bank of England and the Gambling Commission. It also failed to recommend Scottish directors for the two other content regulators: the Authority for Television on Demand (ATVOD) and the British Board of Film Control (BBFC). The proposal for a Scottish director on the board of OFCOM is of doubtful effect, since the work of that body is subject to strong guarantees of its independence and any decision has to be defended before the Competition Appeal Tribunal (CAT). To increase Scottish influence, it would be necessary to have data and evidence submitted in response to the seemingly endless consultations conducted by OFCOM, something entirely absent. By making ad hoc and often confusing interventions, the Smith Commission lost the opportunity to consider systematic reforms, such a Joint Ministerial Committee for Regulation to coordinate input between the four administrations and joint committee of the legislatures to oversee the regulators.

Dispute Resolution: Adjudication or Regulation?

To address situations where commercial negotiations about access and interconnection fail, the Common Regulatory Framework requires national regulatory authorities (NRAs) to have power to resolve disputes between providers. The NRA can impose proportionate obligations. Describing dispute resolution as either a form of regulation in its own right or as simple adjudication is likely to mislead without some analysis of what is meant. There may be a tendency, when the NRA is resolving a dispute, to reflect an interventionist regulatory approach but there are markets that have effective competition and in which the regulator may properly tend towards resolving a dispute towards the adjudication end of the spectrum with a less interventionist approach. This paper reflects on principles that have been applied in the UK and on experience in appeals to and beyond the Competition Appeal Tribunal. Because the task of judges is to tackle the grounds of appeal raised before them, courts do not provide a comprehensive guide to NRAs as to how to handle the wide range of issues that can arise. The UK Supreme Court has emphasised the need for interconnection terms to be consistent with the objectives in Article 8 of the Framework Directive and, within boundaries set by Article 8, for national contract law is to be applied.

Adducing Fresh Expert Evidence in Section 179 Review Proceedings in the CAT

When applying to the Competition Appeal Tribunal ('CAT'), under section 179 of the Enterprise Act 2002, for review of a decision, applicants may wish to use fresh expert evidence in advancing their case. A recent ruling of the CAT addressed such an attempt to adduce expert evidence in section 179 proceedings and consolidated the CAT's approach to such applications.In this article, how the CAT has applied the restrictive conventional judicial review approach to the use of expert evidence is considered. Particularly close attention is given to the reasoning justifying such a stricture and its operation in the CAT context. It is suggested that it may prove almost impossible to adduce fresh expert evidence in section 179 proceedings.

Decentralised Enforcement of EU Competition Law by Sector Regulators The UK Model

This paper was delivered at the Fourth ACELG Annual Conference on “Ten Years of Decentralized EU Competition Law Enforcement: Success or Failure?” on 14 November 2014, University of Amsterdam. The paper examines the early debates over concurrency and what were the initial expectations, sets out the legal arrangements that were put into place and describes the enforcement record of the sector regulators or, more accurately, the lack of enforcement activity. From here, the paper goes on to discuss possible reasons for this and sets the record in the context of the enforcement activities of the Office of Fair Trading and the role of the Competition Appeal Tribunal. The third part of the paper looks at the recent reforms introduced by the Enterprise and Regulatory Reform Act 2013 which, among other objectives, seeks to rejuvenate the enforcement of competition law by sector regulators. Finally, the paper attempts an overall assessment of the UK experience and looks at the possible impact of future developments on the current arrangements.

The changing structure of competition enforcement in the UK: the Competition Appeal Tribunal between present challenges and an uncertain future

The changing structure of competition enforcement in the UK: the Competition Appeal Tribunal between present challenges and an uncertain future

A critical evaluation of the proposed treatment of special cost advantages in excessive prices law

Firms have a special cost advantage when they receive a discount or subsidy without assuming any risk or without being innovative. It is thus a received benefit, rather than an earned benefit, which results in a cost below the normal competitive level. The treatment of these special cost advantages has been a complicating factor when the firm in question is a dominant firm accused of charging an excessive price. The relevant benchmark against which to assess the price charged by the firm is the notional competitive market price, which in turn is linked to the cost of production under competitive conditions. This led to the Competition Appeal Court recommending that special cost advantages should be excluded from the cost build-up of the dominant firm when assessing excessive prices allegations. This would artificially inflate the dominant firm’s costs and reduce the likelihood of a finding against the firm. This recommendation by the CAC has a number of theoretical and practical problems, and it remains unclear how special cost advantages should be treated in South African competition law cases.

Coping with Complexity and Securing Justice: Through Multi-Party Litigation – Lessons from The Cat And JJB Sports

This article examines the draft UK Consumer Rights Bill, introduced into the UK Parliament in January 2014 as the Consumer Rights Bill 2013. It outlines its proposed reforms to the opt-in follow-on collective action that can be brought in the Competition Appeal Tribunal. In particular, it questions whether the proposed reforms will achieve the aim of furthering access to justice and compensatory damages for individuals who have suffered loss as a consequence of competition law breaches. It further questions whether the introduction of a statutory cy press mechanism to transfer any unallocated damages frustrates that aim.

HARM AND OVERCHARGE IN THE SOUTH AFRICAN PRECAST CONCRETE PRODUCTS CARTEL

The harmful effects of cartels depend on a number of features including the size of the over-charge and the durability of the cartel. This paper examines the effect of a very longrunning cartel in a market with low barriers to entry and unstable demand, the South African precast concrete products cartel. We describe how the cartel’s arrangements overcame these dual challenges and examine mark-ups against alternative measures of the competitive counterfactual. This includes a discussion of the use of punishment mechanisms, the implications of vertical integration, how the cartelists adapted to entrants, and the effect of information exchange on firms apparently not part of the explicit cartel. These considerations also have implications for the transition after the end of the explicit cartel arrangements and the extent to which coordinated outcomes may persist. There are particular implications in South Africa where the Competition Appeal Court has held that the penalty calculation should take account of the cartel mark-up.

A Short Note on Scotland's Future The Internet, Broadband and Telecommunications

The Scottish Government published proposals for the administration of an independent Scotland, its case for a vote in favour of independence in September 2014 and an outline of its manifesto in the Scottish parliamentary elections in 2016. Opinion polls continue to show that only about one quarter of the electorate favouring independence. If there is a vote for independence, Scotland would become a member of the EU and comply with its acquis communitaire, join the Council of Europe, becoming a signatory to its conventions, and join the ITU, adopting its Radio Regulations. However, the provisions for broadband, Internet and telecommunications remain vague and without a timetable. There would be a junior minister within a Ministry of Culture, Communications & Digital, with a multi-sector economic regulator, a media regulator, a competition authority and a consumer protection body. Existing licences would be “honoured”. It is unclear whether the existing UK legislation will be converted into Scottish statutes or whether the EU directives will be transposed from scratch. Considerable attention is to be given to increasing services in rural areas, with calls for more fibre and 4G networks, whereas, the low levels of adoption of broadband in urban areas are ignored. Scotland will not request an ITU country code, but seek to continue to use the UK code of 44. It will not use an ISO 3166 two-letter country code top level domain, but instead dot Scot and existing UK top level domains. Significant omissions include provision for regulators of advertising and gambling. There is no mention of replacement for the UK Competition Appeal Tribunal, perhaps appeals would be heard in the courts. Much will depend on negotiations between the Scottish Government and Her Majesty’s Government in London in the period between September 2014 and independence day on 24 March 2016. A complicating factor is the UK general election in May 2015.

The Distortive Effects of Antitrust Fines Based on Revenue

In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterise their comparative static properties and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules of thumb that appear to have the potential to substantially reduce social welfare. How competition authorities (CAs) should set fines and how they actually do so in practice is a highly debated issue among antitrust practitioners. In Europe, where fines are often set directly by the CAs, appeal courts have often slashed CAs’ decisions precisely on the grounds of how they set the fines. An illuminating example is the UK Competition Appeal Tribunal (CAT) decision in 2011 to cut the fines set by the Office of Fair Trading (OFT) for members of the construction recruitment cartel substantially, on the grounds that the ‘wrong’ measure of affected commerce was used.