A decade ago the OFT launched an investigation into replica football kits. It eventually found against leisurewear specialist JJB Sports and six others: fellow retailers Allsports, Blacks Leisure Group, Sports Soccer and JD Sports plus Manchester United FC and manufacturer Umbro, ruling that they had created a cartel to fix the prices of England and Manchester United strips in 2000-01. Heavy fines were imposed.
But for consumer body Which? (formerly the Consumers’ Association), that was just the start of the matter.
A year after the probe was launched, Section 19 of the Enterprise Act 2002 introduced a new clause, 47B, into the Competition Act 1998. This allowed certain ’specified bodies’ to bring damages claims before the Competition Appeal Tribunal (CAT) on behalf of two or more named individuals for proven breaches of competition law, otherwise known as follow-on redress actions.
It was a major development in consumer redress litigation.
“The saying goes that you can be certain of two things in life: death and taxes,” notes Deborah Prince, head of legal affairs at Which?. “Well, I would add a third: death, taxes, and the consumer always pays. So even if price-fixing has been done on a business-to-business level it will still flow down to consumers.”
The first step was to become a designated body entitled to bring a claim under clause 47B. Which? needed to show: independence, impartiality and integrity; that it was reputable; that it would act in the best interests of whomever it was representing; and that it had the capability to bring an action.
Prince had little doubt it would be accepted.
“This provision was largely brought in to benefit Which? so it was very much anticipated that we would apply and that the powers-that-be would approve it,” she says.
Designated body status was granted in October 2005.
“Then we waited until there was a final decision [in the JJB case],” recalls Prince. “And we waited and waited and waited.” JJB always vigorously denied the allegations, and the appeals process needed to be exhausted before a follow-on action could launch. The decision was taken to persue JJB only because the other companies had settled by the time Which? got its powers.
In 2007 JJB was refused leave to appeal to the House of Lords.
“About a microsecond after that we sprung into action,” says Prince. “We had already got our ducks in a row and had been working towards it for some time, getting advice and so on. It meant we were able to go straight to JJB. They didn’t want to agree a settlement, so we initiated proceedings.”
Which? had already started looking for claimants, working closely with football fan groups. The publicity surrounding the case also helped to draw out claimants. Although fundamentally a case about competition law abuses, the combination of football and consumers allegedly being ripped off made for a far wider audience; it even made the front page of The Sun.
“I take my hat off to our PR department – they achieved enormous penetration,” says Prince. “It was a real cross-organisational effort involving the legal team, the PR department and the editorial teams because obviously we flagged it in our own media and via our spokespeople.”
Which? found around 600 fans who had 1,000 shirts between them – effectively 1,000 claimants – and a deal with JJB was struck: either £20 for each claimant or what was understood to be a lesser amount in-store for those not registered with the action.
Because they did not go to court, calculating the damages was a lengthy and complex process involving JJB, Which? and external experts.
“Damages in any follow-on are only ever going to be an estimate,” says Prince. “The question of how much people should pay is difficult: the EU is looking to produce guidelines, but in competition breaches there are too many whats, ifs and buts.”
So what has Prince taken away from the case?
“That I’m never going to do it again under the current system,” she says. “I’m not acting for a small percentage of the people affected and taking up months of everyone’s time. You have to ask if it’s proportional to bring these sorts of actions. Unless you have a big case you’re not going to get people signing up for litigation. Most people are wary, scared that it’s going to be some kind of Kafkaesque experience – and they’re right, it can be.”
Prince believes an opt-out model, rather than the current opt-in system, would be more suitable.
“We can initiate an action for two or more claimants, but in practice you don’t initiate for just two – it’s too expensive,” she explains. “So you do a bit of digging [to find more claimants]. When you get a reasonable number, say 100, you initiate proceedings.”
But even if 1,000 claimants are signed up, a defendant will only pay registered claimants, no matter how many people were affected
by the competition abuse.
“The defendant will pay the claimants you have signed up and the remaining claimants who haven’t get nothing,” says Prince. “When you think about how much litigation costs and the actual versus the potential pool of claimants, it’s just not worth it under the current regime. The fact is that litigation takes a massive amount of time and costs an enormous amount of money, so you need to show that it’s having an equally massive benefit to consumers.
“With an opt-out model, you proceed as if you’re acting for a million claimants, and if only 1,000 sign up you pay them and the balance goes to charity or some other worthwhile cause. Is it a perfect system? No. But is it better then the current system? Definitely.”
Prince is hopeful that legislation will change, but accepts it will not happen soon.
“I’m not holding my breath in the UK and I’ve become dizzy from holding my breath in the EU,” she says. “But should you have any sympathy for these companies [that have been found guilty of breaching competition rules]? No, and it should be pretty straightforward to say 1,000 or a million consumers overspent because of your actions and now you need to compensate them.”
Replica kits case: timeline
2001: Initial complaint made by Sports Soccer. OFT probe launched.
August 2003: OFT finds that JJB and others participated in practices contrary to the Chapter 1 prohibition imposed by Section 2(1) of the
Competition Act 1998. JJB and Allsports contest liability.
October 2004: The Competition Appeal Tribunal (CAT) dismisses their appeal.
May 2005: The CAT imposes a fine of £6.7m on JJB. JJB appeals the finding on liability and the level of the fine.
October 2006: Appeal dismissed.
February 2007: Further request by JJB for leave to appeal refused by the House of Lords. Which? writes to JJB. JJB offers a free shirt and mug to people
with a relevant replica shirt, an offer that Which? turns down.
March 2007: Which? starts proceedings in the CAT against JJB under Section 47A of the Competition Act.
January 2008: Settlement announced.