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In the latest instalment of our Antitrust Review podcast, host Nick Levy is joined by colleagues from Cleary Gottlieb’s Brussels office, as well as two veterans of the Brussels scene, Sir Jonathan Faull, who chairs Brunswick’s European Public Affairs Group, and Peter Guilford, who runs Shearwater, a leading EU public affairs firm. Together, they discuss the legacy of Commissioner Vestager and the in-coming Competition Commissioner, Teresa Ribera, for antitrust enforcement, merger control, digital regulation, and foreign subsidies regulation.

Listen below, or select from the following links:

UK Becomes Fourth Jurisdiction to Introduce Dedicated Digital Platform Regulation, with More Jurisdictions Likely to Follow

On 23 May, the UK Parliament passed the Digital Markets, Competition and Consumers (DMCC) Bill.  The new DMCC Act will bring about some of the most significant reforms to competition and consumer protection law in the UK in decades. Among other major reforms, it introduces a dedicated regime that provides for specific conduct rules for large digital platforms. The UK therefore becomes the fourth jurisdiction—after the EU with its Digital Market Act (DMA), Germany with its s.19A rules, and Japan with its new smartphone bill (also passed on 23 May)—to introduce rules that target a handful of the largest digital firms.[1]

Continue Reading UK Digital Markets, Competition, and Consumers Bill Passed By Parliament

In the latest installment of Cleary Gottlieb’s Antitrust Review podcast, host Nick Levy is joined by Maria Jaspers, who heads the European Commission’s Cartels Directorate. Their conversation covers an array of topics, including the EC’s enforcement practice and leniency program, dawn raids in a digital world, the settlement procedure, follow-on damages actions, global enforcement, and much more.

Listen below, or select from the following links:

On 8 March, the Competition Appeal Tribunal (the “CAT”) handed down a third judgment in two years in the hydrocortisone litigation (the“Judgment”),[1] overturning its own Hydrocortisone (Cartel Infringements) judgment of 29 September 2023.  The CAT found that the provisional findings of the Hydrocortisone (Cartel Infringements) judgment were “unsafe in the most fundamental way” as a result of “a very serious failure of due process” (Judgment, para. 10), referring to a failure by the CMA to cross-examine two Appellant witnesses on a point that formed the basis of the CMA’s case. The CAT overturned fines of nearly £100 million that the CMA had imposed on a number of companies that it found to have been party to an unlawful agreement.[2] The Judgment does not affect a separate finding of abuse of dominance relating to the same products.

The CMA intends to appeal the CAT’s decision, claiming the Judgment is “fundamentally misconceived” and “highly concerning”.  The CAT has already indicated permission to appeal will be granted. 

The Underlying CMA Decision – “Some of the Most Serious Abuses Uncovered in Years”

In its July 2021 Hydrocortisone Decision (the “CMA Decision”), the CMA found that the Appellants had infringed UK competition law by engaging in the following conduct:

1. Participating in anticompetitive agreements (Chapter 1 infringement).  The CMA found that the Appellants had entered into market sharing agreements relating to 10mg hydrocortisone tablets from October 2012 to June 2016. According to the decision, the 10mg Agreement was initially oral but was later put into written form later in two separate written agreements.

The CMA did not contend that these written agreements infringed the Chapter 1 prohibition in themselves. Rather, the Decision found that the written agreements were incomplete statements of the true arrangement between the parties, and that there was, in addition, a “collateral understanding” that (i) Auden Mckenzie/Actavis would supply Waymade and then AMCo with 10mg hydrocortisone tablets on terms that amounted to monthly payments (or “value transfers”) to them; and (ii) in exchange for these payments, each of Waymade and AMCo would not enter the market independently with its own 10mg hydrocortisone tablets; together this was known as the 10mg Agreement.[3] The CMA found that the 10mg Agreement gave Auden Mckenzie, and later Actavis UK, the ability to deny the NHS the potential savings that could have resulted if the companies had begun competing independently in the market.

2. Abuse of dominance (Chapter 2 infringement). The CMA found that Auden Mckenzie and Actavis UK had charged the NHS excessively high prices for hydrocortisone tablets for almost a decade. The CMA found that Auden Mckenzie and Actavis UK increased the price of 10mg and 20mg hydrocortisone tablets by over 10,000% compared to the original branded version of the drug. After competitors entered the market, prices fell gradually, but Actavis UK continued to charge high prices and higher prices than its rivals.[4]

The CMA imposed fines of more than £260 million for the competition law breaches.  At the time of the CMA Decision, Andrea Coscelli, Chief Executive at the CMA said the infringements were “without doubt some of the most serious abuses we have uncovered in recent years.”

Background to the Appeals

The Appellants appealed against the CMA Decision. The CAT handed down two separate judgments in September 2023:

1. First, a judgment dated 18 September 2023, dismissing the Appellants’ appeals against the abuse of dominance infringements (the “Abuse of Dominance Infringements Judgment”), and

2. Second, a closed judgment dated 29 September 2023, provisionally dismissing the Appellants’ appeals in relation to the cartel infringements (the “Cartel Infringements Judgment”). The Cartel Infringement Judgment emphasized its findings were provisional, pending parties submissions on the due process point that formed the basis of the CAT’s March 2024 Judgment.  In particular, the CAT was concerned that the CMA had failed to cross-examine two Appellant witnesses on the “collateral understanding” from which the CMA had drawn inferences. 

Due Process Failures “Fatally Undermined” CAT’s Earlier Judgment

The CAT found that the CMA’s failure to put its “collateral understanding” case to the Appellant witnesses in cross-examination constituted a significant due process failure that rendered the earlier Cartel Infringements Judgment unsafe.

The Appellant witnesses, Mr Sully and Mr Beighton, had denied the existence of any collateral understanding regarding the 10mg Agreements. The CAT held that the CMA had failed to articulate how the collateral understanding was formed at trial, and had simply inferred this by denying the credibility of the Appellant witnesses.[5]  But the existence of the collateral understanding was a “fundamental part”[6] of the CMA’s cartel infringement findings, the “single most important factual question”[7] and “an issue central to the decision under appeal”[8]. In these circumstances, the CAT found that the CMA was obliged to put their case as to the existence of the collateral understanding to Mr Sully and Mr Beighton in cross-examination because the witnesses had put forward a positive case that the CMA’s inference was wrong. 

The following factors were relevant to the CAT’s decision on the need to cross-examine the witnesses:

  • Witnesses’ willingness to testify.  The CAT acknowledged that it is rare for those centrally involved in allegations of serious cartelists misbehaviour to expose themselves to the rigour of cross-examination.  But the circumstances of the particular case were “different from the norm,”[9] with the presence of the Appellant witnesses “chang[ing] the dynamic and [making] cross-examination inevitable.”[10]  Had Mr Beighton and Mr Sully never been called, the CAT would have been entirely comfortable with the CMA Decision. But the fact the witnesses were called and given an “unequivocal”[11] denial of the collateral understanding made it necessary cross-examine them on this point.
  • Gravity of the allegations.  The CMA’s case involved allegations of misconduct, including dishonesty. The serious implications and consequences of the allegations the CMA made against the Appellant Witnesses – in particular, suggesting that Mr Beighton had “deceived” his General Counsel, his company’s solicitors and Auden’s solicitors – required the CMA to put its case to the witnesses properly.
  • Reminders to the CMA during trial. During the trial, the CMA was expressly asked to put questions relating to its “collateral understanding” to the Appellant witnesses, including by the CAT and the Appellants’ counsel. The CMA failed to do so, despite these reminders.[12]
  • Absence of time constraints. There was no time pressure on the CMA in terms of cross-examining the witnesses. The CMA cross-examined both Appellant witnesses over the course of there days and at no point during the proceedings did the CMA suggest that its cross examination was at risk of being curtailed by reason of time pressure.[13]

Lessons from the CAT: If A Witness Is Called, Question Them

The CAT emphasized that where a witness is called by a party, it is incumbent upon the opposing party to “put its case” to that witness, to the extent that that witness is able to give relevant evidence on any point. If serious allegations—such as dishonesty—are made against a witness, those allegations must be fairly pleaded, and put to the relevant witness in cross-examination. 

Consequences of not “putting one’s case” to the other side may be damning. Where the failure to cross-examine is a culpable one and not a mere technicality, “it is very difficult for the court to rectify the deficiency in due process, save by recalling or causing to be recalled the witness to whom the matter ought to have been put…If [that] is not possible, a court will not have any option but to dismiss the claim (where a trial) or allow the appeal.”[14]

Hydrocortisone: The Saga Continues

All eyes are now on the Court of Appeal, which will ultimately determine whether the CAT was correct to allow the appeal based purely on findings of due process, and whether the substance of the Cartel Infringement Judgment and CMA decision will ultimately stand.

[1]             Allergan plc and Others v Competition and Markets Authority [2024] CAT 17.

[2]             The Judgment dealt only with the Hydrocortisone (Cartel Infringement) judgment.  CAT’s

Hydrocortisone (Abuse of Dominance Infringements), which upheld the findings of and fines for the

abuse of dominance infringements under the CMA’s Hydrocortisone Decision, stands.

[3]             Judgment, pp. 22-24. The CAT emphasised that the term “collateral understanding” refers to an

arrangement between Auden and AMCo that might fall far short of the contractual.  “Collateral

understanding” covers any morally binding commitment – it is sufficient if the undertakings have expressed their joint intention to conduct themselves in the market in a particular way that “crosses the line”.

[4]             See CMA Decision, paras. 6.930-6.932. (“The evidence shows that each acted in full knowledge of the

objective of the Agreements, which was to make substantial payments to Waymade and AMCo in

exchange for each of Waymade and AMCo agreeing not to enter the market independently with its own hydrocortisone tablets… This enabled Auden to maintain abusively high prices for hydrocortisone tablets over an extended period of time.”)

[5]             CMA Decision, para. 6.12.

[6]             Judgment, p. 14.

[7]             Judgment, p. 43.

[8]             Judgment, p. 43.

[9]             Judgment, p. 35.

[10]            Judgment, p. 56.

[11]            Judgment, p. 68.

[12]            Judgment, pp. 50-51.

[13]            Judgment, p. 43.

[14]            Judgment, p. 41.

On 14 December 2023, the Competition and Markets Authority (CMA) published its first horizon scanning report examining ten trends in digital markets that the CMA expects will be relevant over the next five years and beyond.

The report aims to “draw on available evidence to discuss and present possible future developments and potential implications for competition and consumers”.[1]  The trends focus on areas such as artificial intelligence (AI), interoperability, and privacy.

Continue Reading CMA Publishes Novel “Trends in Digital Markets” Report

On 20 November 2023, the Digital Markets, Competition, and Consumers Bill (DMCC) cleared the report stage and an expedited third reading in the House of Commons, at which a series of significant amendments were passed. 

Continue Reading Amendments to the Digital Markets, Competition, and Consumers Bill Passed

On September 6, 2023, the French Supreme Court (“Cour de cassation”) upheld the Paris Court of Appeal’s judgment which had dismissed Carrefour’s damage claim against Vania Expansion (“Vania”) [1] following Vania’s participation in the home and personal care cartel.[2]  The French Cour de cassation noted that it is up to the alleged victim to demonstrate that it has not passed on the overcharge to consumers.

Continue Reading The French Cour de cassation dismisses Carrefour’s appeal in relation to its follow-on damage claim against Vania

On July 27, 2023[1], the Higher Regional Court of Düsseldorf ruled on the question of whether a company that has been fined under antitrust law can hold itself harmless by seeking indemnification from the statutory representatives in its managing corporate body.  While the Higher Regional Court rejected a claim for reimbursement of the fine imposed on the company by the German Federal Cartel Office and the costs of the fine proceedings, it confirmed the personal liability of the company’s statutory representatives in its managing corporate body for any consequential damages arising from the antitrust infringement, e.g., as a result of claims for damages by third parties.

Continue Reading Liability of Managing Directors or Management Board Members Involved in Antitrust Violations vis-à-vis the Companies Managed by Them

Over the past two decades, litigation funding in the UK has become increasingly important and more commonly used.  Once deemed contrary to public policy and unlawful, litigation funding is now regarded as playing a significant role in providing access to justice.  Over £500 million of costs are incurred each year by litigation funders in the UK.  Funding is provided for all types of litigation, but it has played a particularly significant role in collective proceedings before the UK’s Competition Appeal Tribunal (CAT).  As the Supreme Court (SC) explained in Merricks, in this type of group litigation the “monetary amount of the consumer’s individual loss means that it will rarely, if ever, be wise [for a] consumer to litigate alone.”[1]

The main question before the SC in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others (the Judgment) was whether litigation funding agreements (LFAs) under which the funder is entitled to recover a percentage of any damages awarded constitute damages-based agreements (DBAs) and are therefore unenforceable and unlawful unless certain prescriptive conditions are met. [2]  The evidence before the SC was that if these types of LFAs were held to be DBAs, it would impact all or most LFAs that have been agreed since litigation funding began, would bring to an abrupt end to hundreds of funded claims with potentially catastrophic financial consequences, and mean that no collective proceedings order in the CAT could ever be pursued.[3]  The SC nonetheless ruled – by a four to one majority – that these LFAs fall within the meaning of DBAs under the relevant statutory scheme. 

The Statutory Scheme

DBAs are defined and declared unenforceable by s. 58AA of the Courts and Legal Services Act 1990 (CLSA 1990) unless certain conditions are met.  Under subsection (3), a DBA is defined as an agreement between a person providing “advocacy services, litigation services or claims management services” and the recipient of those services under which:

  • the recipient is to make payment to the service provider if the recipient obtains a “specified financial benefit” in connection with the matter for which the services are provided; and
  • the amount of the payment is to be determined by reference to the amount of the financial benefit obtained.

An agreement which satisfies the definition in subsection (3) will be unenforceable unless it meets the conditions of subsection (4) and the Damages-Based Agreements Regulation 2013 (DBA Regulations 2013).[4]  Among other things, these conditions prescribe that, for a DBA to be enforceable, it must:

  • specify the reason for setting the payment amount at the level agreed;[5]
  • not require payment of any costs or disbursements incurred by the service provider that have been paid or are payable by another party to the proceedings;[6] and
  • not provide for a payment above an amount which, including VAT, is equal to 50% of the sums ultimately recovered.[7]  

Even if all conditions of the DBA Regulations 2013 are satisfied, a DBA is nevertheless unenforceable in relation to “opt-out” collective proceedings before the CAT under section 47C(8) of the Competition Act 1998 (CA 1998).

Prior to the Judgment, funders and claimants had proceeded on the basis that LFAs under which a funder is entitled to a percentage of any damages fell outside the definition of a DBA. 

Background to the Judgment

The appeal to the SC concerned two follow-on damages claims brought pursuant to the UK’s collective proceedings regime under s. 47B CA 1998: Road Haulage Association Limited v Man SE and others (Case 1289/7/7/18) and UK Trucks Claim Limited v Stellantis N.V. and others (Case 1282/7/7/18).  The claims relate to the European Commission’s infringement decision AT.39824 – Trucks, which found that certain truck manufacturers had engaged in price-fixing arrangements in the EEA between 1997 and 2011.[8]  

In both claims, the proposed class representative (respectively, RHA and UKTC) sought to recover damages on behalf of UK consumers who had allegedly suffered loss as a result of the infringement.  RHA’s claim was brought on an “opt-in” basis, meaning that affected consumers had to agree to being represented in the claim.  UKTC’s claim was instead brought on an “opt-out” basis, meaning that these consumers would automatically be represented unless they declined.  Provision was also made by UKTC for the claim to be brought on an opt-in basis in the alternative.

Under the UK collective proceedings regime, in order for a claim to be brought on behalf of a class of claimants, the CAT must first grant a collective proceedings order (CPO).[9]  One of the requirements for a CPO is that the proposed class representative must secure sufficient funding to pay the defendant’s recoverable costs if ordered to do so.[10]  RHA and UKTC each agreed LFAs with third-party funders as part of their litigation funding arrangements: RHA entered into a LFA for its opt-in claim with the Therium Group (Therium), whereas UKTC entered into two separate LFAs with Yarcombe Ltd (Yarcombe), one for an opt-out claim and the other for an opt-in claim.  Under each of the LFAs, the funders’ maximum remuneration was calculated by reference to a percentage of the damages ultimately recovered in the respective claims.[11]  Neither Therium nor Yarcombe played any active role in the management of the claims.

As a preliminary issue to granting a CPO, certain defendant truck manufacturers argued that the LFAs agreed by RHA and UKTC were unenforceable under s. 58AA CLSA 1990.  It was common ground that the LFAs did not meet the conditions of the DBA Regulations 2013,[12] so the question was whether the reference to “claims management services” under CLSA 1990 covered the funding provided by Therium and Yarcombe.  The CAT held that since the funders were not involved in the management of the claims, they were not involved in claims management services and, therefore, the LFAs were not DBAs within the meaning of s. 58AA CLSA 1990.[13]  The CAT’s decision was upheld by the Court of Appeal (sitting as a Divisional Court) following a judicial review brought by the manufacturers. 

The Judgment

The SC held that a funder’s provision of financial services or assistance to a claimant constituted a “claims management service” and that the LFAs in question were therefore unenforceable.  The SC gave five main reasons for this:

  • No significance should be given to the word “management” in claims management service.  The SC held that no established meaning had been attributed to the term so as to give it particular “potency.”[14] 
  • Claims management service is defined in an earlier statute so must derive meaning from that statute.  The term had been imported from the Compensation Act 2006 (CA 2006),[15] in which it had been broadly defined as advice “or other services in relation to the making of a claim,” by implication, including “the provision of financial services or assistance.”[16]  This broad definition of the term was, moreover, consistent with the objective of CA 2006, which was to confer a general power on future Governments to enable regulation in the public interest of new commercial models to facilitate litigation and access to justice.[17] 
  • Parliament deliberately defined claims management service widely in CA 2006.  The SC considered that the definition was intendedto be wide so as to allow future Governments to regulate in a new and fast developing area.[18] 
  • Pre-existing regulation of funders on the statute book was beside the point.  The SC considered that while section 58B CLSA 1990 was focused on regulating particular persons identified as funders,the power to regulate under CA 2006 was focused on regulation of service activities and was intended to be wide and highly flexible.[19] 
  • Events after 2006 cannot assist in answering the question of statutory interpretation.  The SC held that neither (i) Rupert Jackson LJ’s final report on civil litigation costs, which was published in 2010,[20] nor (ii) the Code of Conduct it recommended for litigation funders, which was later issued by the Association of Litigation Funders of England and Wales (ALF) in 2011, provided guidance regarding the policy context in which CA 2006 was enacted or its purpose.[21]  Even if it were desirable in public policy terms for LFAs of the kind in issue to be available to support claimants to have access to justice, this is not a reason why there should be any departure from the conventional approach to statutory interpretation.[22]

The SC also considered the enforceability of LFAs in the context of opt-out collective proceedings before the CAT.  It held that the fact that the funder’s payment was subject to the CAT’s approval did not exclude it from constitutinga “specified financial benefit”[23] and the fact that under the opt-out LFA Yarcombe as funder shares the financial risks associated with the litigation provides no basis to say that this LFA falls outside the statutory definition of a DBA.[24]  Accordingly, the S concluded that section 47C(8) CA 1998 provided an additional reason why UKTC’s opt-out LFA with Yarcombe was not enforceable.[25] 

Observations

Many cases are potentially affected.  Based on the evidence before it, the SC indicated that its decision could impact the lawfulness and enforceability of “all or most”LFAscurrentlyin place in the UK.  Given the view that previously existed among funders and claimants that a funder could legitimately recover a percentage of damages, funders and claimants had not typically sought to ensure their LFAs were drafted to comply with the DBA Regulations 2013.  In practice, a damages-based LFA would still be unlawful and unenforceable in the context of opt-out collective proceedings in the CAT, even if it complied with the DBA Regulations 2013.  Since damages-based LFAs are prevalent in collective proceedings, all opt-out actions currently before the CAT may be affected to some extent.  Proceedings in the English courts, including group litigation and representative actions, are also likely to be affected where a funder has provided funding pursuant to a DBA.

Reassessment of unlawful funding arrangements.  Because so many LFAs will have been rendered unenforceable by the Judgment, funders and claimants will have to re-assess their funding arrangements. 

Risk allocation of parties to LFAs may be affected.  Where claimants and funders seek to revise their funding agreements to bring them into compliance with the law, it may impact the risk allocation among, inter alia, claimants, solicitors, insurers, and funders, and may raise questions about whether particular claims merit investment (e.g., in terms of funding or solicitors’ time).  For current claims, the Judgment represents an inflection point that might allow a claimant or funder to get out of, or re-negotiate, what has turned out to be a bad bargain. 

Past costs and recoveries may be challenged.  There are unresolved issues relating to the effect of an unenforceable LFA on costs that have already been advanced.  For example, can a defendant be held liable for costs that were met by a funder under an unenforceable LFA?  Can a claimant who paid a success fee to a funder under an unenforceable LFA seek to recover the success fee?  These are questions that will undoubtedly be litigated.

Delays to ongoing proceedings may be required.  For existing claims backed by unlawful LFAs, proceedings may have to be paused pending resolution of the funding issues.  For instance, delay may be required because claimants are unable to take steps necessary to pursue their claim or because defendants no longer have adequate security for costs.  For opt-out collective proceedings in the CAT, the Judgment also calls into question the basis on which CPOs were granted.  The CAT must be satisfied that it is just and reasonable for the class representative to represent the class, which includes an assessment of whether the class representative (i) can adequately act in the interests of class members, (ii) has a plan in relation to arrangements as so costs, and (iii) can pay the defendant’s costs if ordered to do so.[26]  These certification criteria must continue to be satisfied throughout the lifetime of the claim and can be challenged after the CAT has ordered a CPO.  The CAT may have to decide how much time class representatives should be afforded to ensure that they have legitimate funding arrangements in place.

[1]        Merricks v Mastercard Inc [2020] UKSC 51.

[2]        R (on the application of PACCAR and others) v Competition Appeal Tribunal and others [2023] UKSC 28, paragraph 3.

[3]        Ibid., paragraphs 243-244.

[4]        CLSA 1990, s. 58AA(1)-(2).

[5]        DBA Regulations 2013, paragraph 3(c).

[6]        Ibid., paragraph 4(1)(a).

[7]        Ibid, paragraph 4(3).

[8]        Case AT.39824 – Trucks dated 19 July 2016.

[9]        CA 1998, s. 47B(4).

[10]      Competition Appeal Tribunal Rules 2015 (CAT Rules), r. 78(2)(d).

[11]      Judgment, paragraph 6.

[12]      UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. and others and Road Haulage Association Limited v Man SE and others [2019] CAT 26, paragraph 15.

[13]      Ibid., paragraph 41.

[14]      Judgment, paragraph 49.

[15]      The relevant provisions of the CA 2006 were replaced in 2019 by substantively equivalent provisions under section 419A of the Financial Services and Markets Act 2000.

[16]      Judgment, paragraph 50.

[17]      Ibid., paragraph 49

[18]      Ibid., paragraph 62.

[19]      Ibid., paragraph 70 (emphasis added).

[20]      Lord Justice Jackson, Review of Civil Litigation Costs: Final Report (Her Majesty’s Stationery Office, 2010).

[21]      Judgement, paragraph 90.

[22]      Ibid.

[23]      Ibid., paragraph 99.

[24]      Ibid.

[25]      Ibid., paragraph 95.

[26]      CAT Rules, rr. 78(1)(b), 78(2)(d), and 78(3)(c)(i).

The UK introduced a new collective proceedings regime for competition damages claims in October 2015.[1]  The early years of the new regime were characterized by cautious uncertainty as the Competition Appeal Tribunal (CAT) and the appellate courts grappled with identifying the standards for certification.[2]  It took almost six years before the CAT certified the first claim in Merricks in August 2021.[3]  The CAT subsequently certified 10 other claims in less than two years, which in turn, encouraged additional claims to be brought.

Continue Reading CAT Declines Certification of Collective Proceedings against Mastercard and Visa