OFT backs private competition cases on back of Which? action

The Office of Fair Trading (OFT) has issued proposals that could make private competition cases the norm.

The proposals follow the unprecedented action brought by consumer group Which? against a replica football shirts cartel.

The OFT is raising awareness about private actions for breaches of competition law through a discussion paper that floats several suggestions for encouraging individual claims (as first revealed on www. thelawyer.com, 18 April). The regulator launched an informal consultation on 18 April with a 56-page discussion paper. This has been anticipated by competition lawyers since the EU published its own exploratory green paper in December 2005.

The general framework for private and representative claims already exists and the first representative action has been brought by Which?, thanks to the implementation of powers to bring group cases under the Enterprise Act in 2002.

OFT chairman Philip Collins told The Lawyer in an exclusive interview that the case was “a good starting point” and a model for future actions. He envisaged that small to medium-sized enterprises (SMEs), as well as individuals, could club together in representative actions.

Clifford Chance competition litigation partner Elizabeth Morony said: “The focus on consumers and SMEs is hardly surprising, though in my view it remains a moot point whether there’s yet widescale demand by consumers to bring such claims.”

Which? took out advertisements to encourage consumers to apply to the representative action.

It was the cost of private actions to such businesses that worried competition lawyers upon the publication of the paper. One way to curb costs, said Collins, was for cases to be brought in county courts rather than in the High Court.

Commercial funding of litigation could be one way that private actions could be encouraged, he added.

Lovells competition partner Matthew Levitt said: “Going to court to seek redress is at the moment unpredictable, so if these changes can alleviate those problems, that effectively legitimises the OFT’s prioritisation criteria.”

Following a 2005 National Audit Office report, the OFT has priority criteria to judge the 1,200 complaints it receives, as it can only investigate roughly 40 cases a year.

Herbert Smith competition head Jonathan Scott said: “Private enforcement is all the rage – it improves enforcement, it saves the Government money. But the question is how to achieve these objectives without the excesses of US litigation.”

Collins said the fact that the UK system had no triple damages or disproportionate conditional fee arrangements would help avoid this.

Other ideas the paper floated included the creation of an independent competition ombudsman, akin to the Financial Ombudsman Service.

Collins said the OFT’s running would not be affected by the introduction of more private claims despite the regulator’s funds being slashed by 5 per cent in the last Budget.

He did, however, envisage that the OFT would intervene more in court cases, particularly at the appeals stage.

Levitt said: “Although that’s a good idea in principle, I’m sceptical. The European Commission has had the power to intervene since May 2004 and has only done so once.”

Collins said the regulator would welcome external ideas and proposals in the consultation period, which ends on 13 June. He hoped that a public workshop would be launched in September, with OFT proposals then being sent to the Government.