Litigation Funding Agreements (Enforceability) Bill will see “no further progress”

 

 

On 22 May Prime Minister Rishi Sunak announced that a general election would take place on 4 July 2024. As a result, much pending legislation did not survive the pre-election wash-up before parliament was prorogued on 24 May.

The Litigation Funding Agreements (Enforceability) Bill did not reach completion on 24 May and the parliament website states that: "The 2023-24 session of Parliament has prorogued and this bill will make no further progress."

If passed, the bill would have reversed the impact of the ruling in R (PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28. By a 4 to 1 majority, the Supreme Court upheld an appeal by DAF challenging the litigation funding agreements (LFAs) in two separate follow-on collective claims against members of the EU trucks cartel.  The judgment renders those arrangements unenforceable until certain conditions are met.  The case concerns the definition of a damages-based agreement (DBA), derived from one legislative context - the Compensation Act 2006 (the CA 2006) - and its use in a different legislative context (section 58AA of the Courts and Legal Services Act 1990 (CLSA 1990)).  Section 58AA(1) and (2) CLSA 1990 provide that a DBA will be unenforceable unless certain conditions are met. The Damages Based Agreements Regulations 2013 (the DBA Regulations 2013) set out further requirements which must be satisfied if a DBA is to be enforceable. It is accepted that the LFAs in this appeal would not satisfy these conditions.  The relevant part of the definition of DBA in this appeal, pursuant to section 58AA(3), is whether the LFAs involve the provision of “claims management services".  The Court held that claims management services are capable of covering LFAs when “read according to their natural meaning”.  As a result, the claimants’ funding arrangements fell under the scope of the DBA Regulations 2013 since damages-based funders provide “client management services” and would be paid based on how much the tribunal awarded as damages.

The bill provided, with retrospective effect, that LFAs were not DBAs and thus they did not have to comply with the DBA Regulations 2013. This was achieved primarily by amending the definition of a DBA in section 58AA of the Courts and Legal Services Act 1990 to provide that an agreement, to the extent that it is an LFA, is not a DBA.

Some funding agreements needed to be revised to reflect the Supreme Court’s recent ruling but certain of the more prominent funders in the industry have reacted to say the judgment will not stem their appetite to fund a claim with merit.  With the demise of the Litigation Funding Agreements (Enforceability) Bill, appeals against certain CAT decisions finding that LFAs are not DBAs now take on a renewed significance. We will have to wait and see whether similar legislation is introduced in the next parliament.

 

CMA market investigation into veterinary services for household pets

 

The Competition and Markets Authority has launched a market investigation into the supply of veterinary services for household pets in the UK. The investigation will extend to the supply of prescribed veterinary medicines for those pets.

The CMA has identified features that may make it difficult for consumers to make well-informed choices, including information asymmetry, vulnerability at the point of purchase, and lack of transparency about pricing, ownership of the vet practice and treatment options.

The CMA finds that a majority of vets practices are owned by large corporate groups where their business models may lead to limited consumer choice.

The CMA also considers that consumers may be over-paying for medicines and that there are weaknesses in the relevant regulatory frameworks.

Between October and December 2024, the CMA plans to publish working papers which will set out its initial thinking.

The CMA must publish its final report by 22 November 2025.

https://www.gov.uk/government/news/cma-presses-ahead-with-full-investigation-into-vets-market

CAT approves collective settlement in rail ticket overcharging claim

 

 

The Competition Appeal Tribunal (CAT) has granted an application by Mr Justin Gutmann (the Class Representative) and Stagecoach South Western Trains Limited (SSWT) for a collective settlement approval order (CSAO).

The collective action concerns a claim that First MTR South Western Trains Limited and SSWT had abused their dominant positions by failing to make their "boundary fares" sufficiently available, resulting in rail passengers being overcharged for certain journeys.

The PCR and SSWT agreed to settle in relation to the claims brought against SSWT but claims against First MTR South Western Trains Limited are continuing.

Under the settlement, SSWT will make available up to £25 million to pay class members who make claims. The settlement also contains provision for the payment of the costs of the Class Representative (and its funders).

Under section 49(5) of the Competition Act 1998, the CAT may only make a CSAO if it is satisfied that the terms of the settlement are just and reasonable. This involves being satisfied that, whilst the settlement may not be perfect, the settlement is fair and reasonable. There may be a range of settlements that are fair and reasonable and not necessarily the ideal settlement that the CAT would otherwise be seeking to achieve.

The CAT has concluded that, in the circumstances of this case, and where it does not consider that the merits are strongly in the Class Representative’s favour, the settlement is just and reasonable.

Justin Gutmann v First MTR South Western Trains Limited and Stagecoach South Western Trains Limited [2024] CAT 32

CMA adopts changes to guidance on duty to refer mergers for in-depth investigation

 

CMA adopts changes to guidance on duty to refer mergers for in-depth investigation

 

The Competition and Markets Authority (CMA) has adopted revised guidance on the exceptions to the duty to refer mergers for in-depth Phase 2 investigations.

The revisions concern the exception for markets of insufficient importance (de minimis) to justify a reference.

The key changes are that:

1.        There is now a single, increased threshold for the application of the de minimis exception. The CMA will generally consider the market(s) concerned to be of sufficient importance to justify a reference (such that the exception will not be applied) where the aggregate annual value in the UK of the market(s) concerned is more than £30 million.

2.        The application of the de minimis exception is no longer contingent on there being no clear-cut undertakings in lieu of a reference available.

The new guidance is largely unchanged from the draft version on which the CMA consulted in November 2023.

The new guidance will apply to all new merger cases from 25 April 2024. This includes all cases where a Phase 1 investigation has not formally been launched on 25 April 2024.

https://assets.publishing.service.gov.uk/media/662a432d55e1582b6ca7e5e7/Exceptions_to_the_duty_to_refer_-_guidance.pdf

CMA@10

 

CMA@10

I was pleased to attend today’s 10-year anniversary event a decade on from the creation of the Competition and Markets Authority.

The event charted the contributions and challenges of the CMA over the last 10 years and as it continues to evolve. The CMA's stated mission is to make markets work well in the interests of consumers, businesses and the economy.  Its ambition is to be consistently one of the leading competition and consumer agencies in the world.

Kevin Hollinrake MP, the UK Minister for Enterprise, Markets and Small Business said that the Digital Markets, Competition and Consumers Bill will “radically change the balance of power” between big corporations and smaller businesses. He remarked that: “We’re now about to enter a pivotal moment. A seismic shift. A competition revolution.”  Sarah Cardell, Chief Executive of the CMA, described the current times as a “watershed moment” as far as digital issues are concerned.

So what lies ahead for the next ten years?  Cardell hoped that by then every business and consumer will be able to say that “the CMA has done something for me”.  It’s an interesting thought.  It resembles remarks from EU Commissioner Vestager that even though the years roll by and we may get a few grey hairs, some of the fundamental principles of competition law are enduring: “In antitrust, what is at stake is, in some ways, as old as Adam and Eve because it is about greed, to get more”. 

With the challenges of Big Tech, climate change, asymmetric economic shocks and the UK having some of the lowest investment levels in business across the G7, it is tempting to think that competition law can solve most things.  Of course it cannot do that and it cannot do it alone.  Competition law and competition authorities do need to stay relevant and responsive and keep the consumer interest in focus.  Not as an abstract economic concept but consumers as human beings, with real lives and bills to pay.

The Competition and Markets Authority’s CMA@10 event ended today.

CMA produces update to paper on foundational AI models

 

The Competition and Markets Authority (CMA) has updated its September 2023 report in its review of competition and consumer issues in relation to artificial intelligence (AI) foundation models.

In March 2023 the government asked regulators, including the CMA, to think about how innovation in and deployment of AI can be supported.

The CMA sets out its final principles for guiding the market to positive outcomes in terms of access, diversity, choice, fair dealing, transparency and accountability.

The CMA also identifies risks that firms that control critical inputs for developing foundation models may restrict access to them to shield themselves from competition.

The CMA is also intensifying its use of merger control to examine whether AI collaborative arrangements between major players fall within the current rules.  For example, speaking at the ABA Antitrust meeting in Washington the CMA has noted that Google, Apple, Microsoft, Meta, Amazon and Nvidia are involved in an “interconnected web” of over 90 AI partnerships and investments.  The CMA will also consider such arrangements under its new powers anticipated in the Digital Markets, Competition and Consumers Bill.

The CMA will provide a further update in autumn 2024.

 

https://www.gov.uk/government/news/cma-outlines-growing-concerns-in-markets-for-ai-foundation-models

CMA letter to nail technicians about compliance with competition law

 

The Competition and Markets Authority (CMA) has issued an open letter to nail technicians to remind them and their trade associations of their obligations under competition law.

 The CMA has unsurprisingly emphasised that businesses must set their prices independently of their competitors. The CMA has further underscored that businesses should not discuss or coordinate their actions on the timing and amount of future prices increases (whether directly or through a trade body).

The CMA’s guidance comes on the back of media reporting where the CMA notes that it understands that “a campaign has been launched encouraging nail technicians to raise their prices today. In that context, we want to remind all businesses in this sector of their obligations to comply with competition law.” 

The CMA’s guidance is part of its online collection of competition law guidance.  The initiative is a further reminder of the CMA’s education outreach on competition compliance directed at small businesses, many of whom are sole traders.

https://www.gov.uk/government/publications/open-letter-to-nail-technicians-about-compliance-with-competition-law