European Antitrust and
Trade Regulation Alert
1 December 2010
Authors:
UK Appeals Court Rejects Class Action
Neil A. Baylis
neil.baylis@klgates.com
+44.(0)20.7360.8140
Vanessa C. Edwards
vanessa.edwards@klgates.com
The UK Court of Appeal ("CA") has dealt a further blow to efforts by claimants
firms to initiate US-style class actions in UK antitrust litigation. In Emerald
Supplies Ltd. and another v British Airways plc [2010], the CA upheld the lower
court’s rejection of the representative element of the claim, finding that not all the
potential claimants were in the same situation.
+44.(0)20.7360.8293
Scott S. Megregian
scott.megregian@klgates.com
+44.(0)20.7360.8110
K&L Gates includes lawyers practicing out
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The High Court Claim
Two flower importers sued British Airways ("BA") in 2008. This case was a
follow-on damages claim relating to the European Commission’s decision to fine
BA and other carriers for fixing the prices of air cargo services.
The claimants purported to represent groups of affected users of air cargo services.
The claimants stated that there were 178 further potential claimants. They claimed
three types of loss. The first was the inflated element of the price BA had charged
them for shipping their cargo. The second was the loss of sales in so far as they had
passed on the inflated price to their own buyers. The third was loss of sales of other
products as a result of damage to their brand.
The High Court struck out the representative element of the claim on the basis that
it did not satisfy the procedural requirement that all represented victims have "the
same interest" in the claim at the time it was issued. The Court could not identify
those who, at the start of the action, were "direct or indirect purchasers" as
described in the particulars of claim, because exactly which prices had been subject
to inflation depended on the judgment. Furthermore the relief would not be equally
beneficial to all members of the "class", as each party’s loss and damage depended
on whether the inflated prices had been absorbed or passed on.
The CA Judgment
The CA upheld the decision of the High Court, agreeing that the class of
represented parties had not been defined in the particulars of claim with sufficient
certainty. The claimants did not all have "the same interest" in the proceedings, and
would not all benefit equally from them. Conflicts also arose in relation to the
"passing on" defence, which the judgment confirms is available in the UK. Direct
purchasers who had passed on the price increase to their customers would not want
BA to raise the defence, as it would probably be successful. Conversely, indirect
purchasers who had suffered because the direct purchasers had passed the price
increase on to them would want BA to raise the defence against such claims.
The CA declared that because the class would be identifiable only on the handing
down of the final judgment, it could not be pursued as a representative action.
Although the membership of a class can change, the ability to define whether
someone is in the class or not must be constant.
European Antitrust and Trade Regulation Alert
The CA’s decision sets a very high bar to
potential representative actions in antitrust
litigation which is far more restrictive than
the US class action requirements. Firstly the
judgment confirms that the class of persons to be
represented must be identified or identifiable on
the date the action is commenced. In the US, the
concept of the "class" is far more flexible, and it
can be narrowed at a later stage in the
proceedings. Secondly the judgment mandates a
strict literal reading of the "same interest"
requirement. Claimants will be precluded from
meeting that test where they will not benefit
equally and where different defences can be
raised against them. On the other hand the
governing principle in the US is that a class can
be certified where the common issues
"predominate". Finally, the CA decision also
requires that the claimants must suffer the same
damages. In the US, differing qualification of
damages is often not sufficient to delay class
actions as classes can be limited to liability, with
separate damages calculations for individual
plaintiffs.
There is little chance of a second appeal in this
case, and in any event it is unlikely that the
Supreme Court would depart from this decision.
BA in the Competition Appeal Tribunal, subject
to any appeal against the Commission’s decision.
The Future for Representative
Actions in the UK
In a Speech on 15 October 2010, Joaquín
Almunia, the European Competition
Commissioner, said that although Europe needs
to avoid the "excesses" of a US-style class action
model, a collective redress directive specific to
private antitrust damages actions is needed.
Access to the right to such redress is at present
inadequate in many Member States, and the cost
and time inefficiencies of the current system
suggest that collective action at national level
would be a pragmatic solution.
Almunia announced a public consultation for the
beginning of 2011. Following this he anticipates
agreement on a general legal framework for
collective redress in the Spring. This will be used
to launch specific legislative initiatives to
address representative actions. A proposal for an
antitrust-specific directive is expected in the
second half of 2011. It is doubtful whether this
will come in time to help the unrepresented
claimants in this case.
The now unrepresented companies can
commence separate actions for damages against
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