UK Competition Litigation Quarterly Update: Q1 2025

In the first collective action to be fully refused certification by the Tribunal, the class representative was subject to cross examination on the claim’s funding arrangements and came up short in her grasp of the case. This important judgment marks a significant reset of the standard expected of class representatives helming collective actions in the CAT.

On 14 January 2025, the Competition Appeal Tribunal handed down a judgment refusing to certify proposed collective proceedings concerning the resale of tech products brought by Christine Riefa, a university professor, on the basis of its considerable doubts about whether she was capable of fairly and adequately acting in the interests of class members for the purposes of the ‘authorisation condition’.  The key concern identified by the Tribunal was that the PCR had failed to demonstrate sufficient independence or robustness to act as a class representative.

One key aspect of this was that the Tribunal and Defendants had taken issue with certain provisions of the litigation funding agreement that provided for the funder’s return which, in the Tribunal’s view, “seemed inimical to the interests of the class” as they involved the funder being paid out ahead of the class and potentially receiving all of the recovered sums, leaving nothing for the class.  Further, in a supporting witness statement the PCR had incorrectly stated that the funder would be paid from unclaimed damages if the proceedings were successful, contrary to agreed funding terms.  In the face of those criticisms at an earlier hearing, the PCR renegotiated the relevant funding terms and obtained a better deal for the class.  However, the Tribunal had a lingering concern that she had entered into the original terms on the basis of a critical misunderstanding and apparently without making efforts to identify better terms or alternative sources of funding.

It was in that context that the Defendants successfully applied for the PCR to be cross-examined at the certification hearing.  The answers she gave under cross-examination were “hesitant and uncertain”, the Tribunal held in the judgment.  The Tribunal also expressed “considerable concern” that the PCR gave the impression of not really understanding how one of the key amendments to the funding terms would operate in practice.

In reaching its conclusion to refuse certification, the Tribunal emphasised that collective proceedings are “very complex proceedings” involving high stakes.  A class representative must therefore be capable of carrying out the significant responsibilities that go with this.  To do so, they must be an “independent advocate for the class”, not “merely a figurehead” for proceedings conducted by their legal representatives.

The judgment, which has made waves already, will no doubt serve as a cautionary tale of great interest to funders, class representatives and those considering taking on that role, not just in terms of the high standard the Tribunal expects of class representatives in general, but also for the particular importance ascribed by the Tribunal to the class representative robustly and independently advocating for the interests of the class when it comes to the issue of the funder’s return.

(1602/7/7/23 - Christine Riefa Class Representative Limited)

The long running Merricks collective action headed to a close with the agreement of a £200m settlement.  The deal led to a public spat between, on one side, the class representative and his legal team and, on the other, the claim’s litigation funder, which was unsatisfied with the relatively low value of the settlement when compared with the headline claim value.  The awaited formal judgment will likely provide clarity on how the Tribunal will adjudicate diverging interests between class representatives and funders.

On 21 February 2025, the Tribunal approved a £200m settlement agreed between Mastercard and class representative Walter Merricks, in the long running collective proceedings relating to anti-competitive multilateral interchange fees, thereby rejecting a challenge by Merricks' funder, Innsworth Capital, that the settlement amount was too low and ought not to be approved.

The settlement amount, which represents a tiny fraction of £16bn originally claimed, has led to questions being raised, for example by lobby group Fair Civil Justice, about whether the action has really delivered on facilitating access to justice, particularly when the litigation spanned 9 years and involved 11 hearings before the Tribunal, multiple appeals before the Court of Appeal and an appeal to the Supreme Court.

The public spat between Merricks and Innsworth has also brought to the fore the question of what standing, if any, a funder has to challenge a settlement that has agreed between a defendant and a class representative.

Out of the settlement sum, the settlement notice published by Merricks confirms that Innsworth stands to be re-paid the £45.57m it spent in funding the claim, with a further sum of £54.43m that could be paid to Innsworth as a return, depending on the level of uptake by class members.  Of the £100m pot to be distributed to eligible class members that come forward, compensation could be as low as £2.27 per class member (in the unlikely event that all eligible class members claim compensation) or up to £45 (as proposed by Mastercard) or £70 (as proposed by Merricks) if only a subset of class members come forward to collect their settlement sums.

We await the Tribunal’s detailed reasoning, following the collective settlement approval order hearing which took place on 19-21 February 2025.  The Tribunal’s judgment will be informative as to the Tribunal’s approach to approving (or rejecting) collective settlement proposals agreed between parties in collective proceedings, and may provide an answer to the question of how the Tribunal intends to approach diverging interests between class representatives and funders.

(1266/7/7/16 - Walter Hugh Merricks CBE v Mastercard Incorporated and Others)

Hot off the heels of Riefa came this second collective action judgment in which the claim was defeated at certification stage, although here on preliminary issue legal grounds as opposed to pure certification issues.  In a judgment which highlights the importance of considering fully the interplay between regulation and litigation when bringing claims in regulated industries, the Tribunal held that the water collective actions were precluded by operation of the Water Industry Act such that the alleged abuse of dominance in this case was a matter for the regulator, Ofwat, as opposed to the courts.

On 7 March 2025, the Competition Appeal Tribunal refused to certify collective proceedings brought by Professor Carolyn Roberts against six UK water companies.  This is only the second time since the Tribunal’s 2017 judgment in  Walter Hugh Merricks CBE v Mastercard Incorporated & ors (which was overturned in the Supreme Court) where a proposed class representative has been refused certification outright without being offered a second bite of the cherry (albeit in this case the claim was dismissed on preliminary issue legal grounds brought at the certification stage, as opposed to on pure certification issues).  The ruling is an important one, which highlights the interplay between regulation and competition law issues.

The claim alleged that the water companies had abused their dominance by misleading their regulator, Ofwat, through under-reporting the number of pollution incidents which occurred on their networks, resulting in customers being overcharged for sewerage services (the regulatory regime rewards/punishes water companies for outperformance/underperformance on pollution incidents through higher/lower customer bills). The defendants argued that the subject matter of the claims was a matter for the regulatory regime and not a matter for a competition damages claim.

The Tribunal sided with the defendants and found that the claims fell within the scope of a statutory exclusion contained in S.18(8) of the Water Industry Act 1991. The Tribunal concluded that the claims must therefore fail because the water companies’ alleged failure to fulfil their reporting duties could only be remedied as prescribed by the legislation.  As a result, any alleged misreporting was essentially a matter for Ofwat, rather than the courts.

The Tribunal did, however, confirm that it would have granted class certification in each set of proceedings, had they not been precluded.  The Tribunal also rejected submissions made by the Defendants that competition law did not apply to the conduct of the water companies, as regulated monopolies, and saw some force in the PCR’s submission that for a dominant undertaking to mislead a public authority is in any event capable of amounting to an abuse of dominance.

Whilst not all regulated industries contain legislation with such pitfalls for claimants, and this is perhaps an extreme example of how regulation can impact such claims, there have been a number of previous claims in which regulatory issues have impacted damages that can be sought from regulated defendants, or the means by which any overcharges were (or were not) ‘passed on’ by regulated claimants.  This judgment, most of all, draws into sharp focus the need to consider fully the interplay between damages actions and regulation, where claims are being pursued in regulated industries.

(1603/7/7/23 - Professor Carolyn Roberts v Severn Trent Water Limited and Others)

In approving further settlements in the roll-on, roll-off car shipping collective action, the Tribunal made clear that sums must be ringfenced for class members, even if this means funders and other stakeholders taking haircuts on their returns.  The ruling is of interest to settling parties as it provides further guidance as to the conditions the Tribunal may require in granting approval to settlement deals.

In its ruling dated 15 January 2025, the Tribunal approved collective settlements between the class representative, Mark McLaren, and two of the defendant groups in the RoRo collective proceedings relating to roll-on, roll-off car shipping.>

In its analysis of whether the settlement sums (£24.5m for WWL/EUKOR and £12.75m for K-Line) were ‘just and reasonable’, the Tribunal remarked that success can be measured in a number of ways, and ‘success’, as defined for the purposes of a funding or conditional fee agreement, is not necessarily a success for the class as a whole.  The Tribunal indicated that when approving collective proceedings settlements, it will assess whether the proceedings have been a success overall, including by looking at the amount of damages available to class members, the likely and actual take up by the class, and what may happen to undistributed amounts (in terms of reversion or payment to charity).

Both proposed settlements included a form of upfront sum (referred to as “Immediate” or “Guaranteed” damages) and a deferred sum (“Deferred” or “Additional” Damages).  In the case of WWL/EUKOR, the “Deferred Damages” only become payable upon notification by McLaren of a shortfall in damages due to class members, whereas in the case of K-Line, the “Additional Damages” are payable at the same time as the “Guaranteed Damages” but are subject to a reverter mechanism, meaning that any unused portion of the “Additional Damages” is repayable to K-Line.

The Tribunal stressed that it would not have approved the proposals, had it not been for the clear ring-fencing of a minimum class members’ entitlement.  It was also clear that it would not approve any clawback mechanism which allowed stakeholders to recover costs, fees and disbursements out of pots ring-fenced for class members.  In fact, the Tribunal took the unusual step of requiring “Stakeholder Undertakings”, from both the class representative and funder’s lawyers, that unrecovered costs at the end of proceedings would not be reimbursed from the “Immediate Damages” and “Guaranteed Damages” pots, which would remain ring-fenced for class members.  Recognising concerns raised by Woodsford Group Limited, McLaren’s funder, about delay being suffered (and associated financing costs being incurred) by the funder in awaiting payout from the case, the Tribunal did however grant stakeholders liberty to apply for payment.

The ruling, which considers the structures of the settlements agreed between the parties, as well as the Tribunal’s intervention to protect sums payable to the class, provides useful insights into the different ways that parties may agree to carve up a settlement sum and how the Tribunal may approach this, when it comes to deciding whether to give a settlement the seal of approval.

(1339/7/7/20 - Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others)