Regulate, don’t promulgate

The legal sector and not victims will benefit most as the UK seeks to boost the number of antitrust claims

It has become an article of faith for European competition regulators over recent years that there are not ’enough’ compensation claims by ­antitrust victims. But I question that view: there are claims and, in any event, many other wrongs that are not compensated.

If the costs of compensating individually are out of proportion to the compensation itself, there is nothing wrong in having the more indirect compensation realised through public use of fines, although that may be at odds with the political consensus.

The bigger issue I have with the new proposals is that, even if one ­accepts the thesis that there should be more claims, they are flawed.
First, it is questionable how much benefit there will be for victims rather than lawyers. It is only the smaller claims that are not economic and there is every ­reason to think that many of those with small claims will continue to take the view that it is not worth them claiming, even if all they have to do is complete a claim form with proof of purchase. A significant proportion of the damages paid will therefore go to the Access to ­Justice Foundation – ­effectively an additional tax to shore up the ever-declining legal aid budget.

Lawyers will be motivated to bring claims even where losses are small as they will be able to use no-win, no-fee arrangements without necessarily any link to the amount of damages. In fact, despite a continuing ban on contingency fees, the lawyers may take a substantial share of the damages if, as seems likely, the success fee will be paid out of the damages.

Second, the Government may be too optimistic in its claim that it will avoid the vices that have given rise to the US litigation culture. We may not have treble damages, but we do have pre-judgment interest that can easily double the amount. We may not have contingency fees for lawyers, but we do have success fees, and there also seems to be nothing to stop litigation funders taking a share of damages.

Third, there appears to be a real issue of double jeopardy. For an opt-out system to work it must be binding on those who do not opt out. It is not obvious that a UK opt-out judgment would be binding elsewhere in the EU (or beyond). There is a risk, therefore, that businesses will end up paying twice or, at least, that claimants will get two bites at the cherry.

There are elements of the proposals that look sensible, such as widening the Competition Appeal Tribunal’s jurisdiction, but the overriding ­impression is that they will do more to promote growth in the UK legal services sector than ­anything else.

Businesses face a heavy cost and would do well to make sure their voices are heard in the ­consultation.