CMA new voluntary redress rules provide a route to compensate victims of competition law infringements

The Competition and Markets Authority has finalised its guidance on its new powers to approve voluntary redress schemes with effect from 1 October 2015.  It explains the circumstances in which the CMA and the concurrent competition regulators may offer up to a 20% discount in the administrative penalty where businesses who have infringed competition law establish schemes to compensate their victims.

The relevant authority may only approve a scheme at the time it takes an infringement decision, although it may consider a scheme before adopting an infringement decision.  Both cartel and abuse of dominance infringements may form the basis of an approved scheme, whether in respect of infringements of the Competition Act 1998 or Articles 101/ 102 TFEU.

The CMA considers that the new rules will make it easier, quicker and less costly for victims of competition law breaches to obtain redress.  The schemes are being presented as a form of ADR and the CAT may take ADR into account when considering whether to stay proceedings to allow for a settlement to be reached, whether claims are eligible for treatment as collective proceedings and whether collective proceedings should be on an opt-in or opt-out basis.

Notably, the CMA has uplifted the maximum discount to 20%. The draft guidance offered a 10% maximum reduction in the administrative penalty. The change follows comments received that a greater penalty reduction was needed to provide adequate incentives to businesses to enter into redress schemes.  However, there are some doubts as to whether what is on offer to infringing  businesses is sufficiently compelling.  Whether the scheme is approved will be a matter for the scheme’s Board, subject to CMA approval.  This may make businesses reticent to cede such control before they know the full details of the infringement decision against them.  Ultimately, it will come down to whether the discount on offer is sufficiently attractive against the likely costs of private damages claims. 

Parties contemplating entering into a scheme will also need to consider the risks of accelerating their exposure to private litigation in the event that settlement cannot be achieved.  This may be one area where we might expect to see increased use of mediation in competition law cases in paving the way towards settlement.

CMA press release, CMA Guidance Approval of redress schemes for competition law infringements (CMA 40) and Summary of responses to consultation