The future landscape of opt-out collective proceedings

Answer

This article explores the future landscape of opt-out collective proceedings following notable recent developments that have the potential to curb the prodigious growth of this sector. In considering this, the article looks to the ongoing legal battle over the £200 million settlement of Walter Hugh Merricks CBE v Mastercard Incorporated and Others (Merricks); the first opt-out collective action to be brought under the amended Consumer Rights Act, the recent judgment in Justin Le Patourel v BT Group PLC (Le Patourel), the first opt-out collective action to proceed all the way to trial; and the recent refusal of the Competition Appeal Tribunal (CAT) to certify proceedings in Christine Riefa Class Representative Limited v Apple Inc and Others (Riefa) on the basis that the proposed class representative (PCR) wasn’t suitable to represent the class.

The growth of the UK's collective action regime 

Opt-out collective proceedings are legal proceedings brought against a defendant by a class representative (CR) on behalf of a group, with one CR being able to bring a claim on behalf of millions of consumers that may have been affected by a defendant's conduct. The Consumer Rights Act 2015 amended the Competition Act 1998 to introduce a new collective proceedings regime, allowing for opt-out collective proceedings over competition law infringements.

To bring an opt-out claim the claimant must apply for a collective proceedings order (CPO) and the CAT will consider the basis of the claim and whether the proceedings are suitable to be brought on an opt-out basis. Merricks was the first case in which the CAT granted a CPO on an opt-out basis, after the Supreme Court upheld the Court of Appeal decision which had significantly lowered the threshold for a CPO to be granted.

Since the lowering of the threshold, the number of CPOs being granted by the CAT has increased exponentially. However, three recent developments may have the combined effect of plateauing the rapid growth competition lawyers have grown accustomed to.

Key cases

Walter Hugh Merricks CBE v Mastercard Incorporated and Others

The first decision that may impact future growth is Merricks, the first opt-out collective proceeding to be brought. The CAT hearing on the collective settlement approval order (CSAO) took place between 19 and 20 February 2025 and sits against the backdrop of the ongoing dispute between Walter Merricks, the CR, and Innsworth Capital, the litigation funder funding the claim.

Background

In 2017 the CAT ruled that the claim wasn’t suitable for a CPO as it wasn’t suitable for an aggregate award of damages, and it wasn’t possible to apportion damages. This was appealed up to the Supreme Court, which upheld the Court of Appeal decision to overturn the CAT ruling that the claim wasn’t suitable for a CPO. In doing so the Supreme Court gave guidance as to how the CAT should, in future, decide CPO applications. The case was subsequently remitted back to the CAT, which approved the CPO, making Merricks the first CPO to be approved by the CAT.

Settlement

In December 2024 the Class Representative (CR) and Mastercard reached a settlement under which Mastercard would pay £200 million. However, an opt-out collective proceedings settlement requires CAT approval. The CSAO hearing concluded on 21 February 2025; however, before the hearing the CAT granted Innsworth Capital (Innsworth) permission to intervene in the proceedings, which argued that the agreed settlement is in breach of the CR's obligations under the litigation funding agreement (LFA).

On 21 February 2025, the last day of the CSAO hearing, the CAT approved the £200 million settlement, and expected to be able to give an order as to how the money will be distributed in the next few weeks. However, the CAT expressed concerns over the ringfenced pot of £45,567,946 for Innsworth. As this represents a 100% return on the funds invested into the claim for Innsworth, this will, in effect, be paid to reimburse the funder for what it’s paid in legal fees. The CAT referred to the possibility of referring the costs to costs assessment. The rationale for this was that it couldn’t adequately supervise the settlement if such a large sum is paid with no assessment as to its reasonableness, given it reduces the amount of the settlement available to the class. It was suggested in the hearing that this could leave law firms with a large costs liability after a settlement has been agreed and approved.

Justin Le Patourel v BT Group PLC

The second decision that may impact future growth is Le Patourel, in which judgment was handed down on 19 December 2024. As the CAT's first judgment in the UK's opt-out collective proceedings regime, the ruling is significant.

Background

In 2017 Ofcom undertook a review of the standalone landline telephone services market and outlined concerns over BT's pricing. While Ofcom didn’t reach any final findings, it accepted undertakings from BT to reduce the price of these services by £7 a month, following provisional findings that the prices charged had been above competitive levels.

Of the back of this review, Justin Le Patourel applied to commence collective proceedings, on behalf of a class of more than two million UK purchasers on 15 January 2021, under section 47B of the Competition Act, the trial concluded in March 2024.

Decision

To be liable, it must be shown that the price BT charged had been both excessive and unfair, applying the United Brands Company v Commission of the European Communities two limb test. After hearing expert evidence from the parties, the CAT found that in the circumstances of this case an excessive price was 20% or more above the notional competitive benchmark. As BT “significantly and persistently” charged between 25% and 49.9% above the benchmark, it was found that the price had been excessive. However, to satisfy the unfair limb, the price must be unfair, either in and of itself or by reference to relevant comparators. After considering several factors, such as whether BT had had any exploitative intent and evidence of class members switching to other providers, the CAT found that the price hadn’t been unfair. As such, the claim was dismissed.

Christine Riefa Class Representative Limited v Apple Inc and Others

The third decision that may have the potential to curb the remarkable growth of opt-out collective proceedings is the CAT refusal to certify proceedings in Riefa.

Background

By a claim form filed on 25 July 2023 Professor Christine Riefa, the PCR, contended that Apple and Amazon entered into agreements that prevented, restricted or distorted competition in the UK, with those agreements causing a significant reduction in the number of resellers of Apple products active on, and an increase in the prices of Apple products sold on, the Amazon UK Marketplace.

CPO hearings

At the first CPO hearing, the CAT raised concerns over the confidentiality of the LFA and the provisions relating to the order of priority of payment. The CAT then gave the PCR the opportunity to file further evidence but also allowed the defendant's application to cross-examine the PCR at the second CPO hearing.

Following the second CPO hearing, the CAT refused to certify the opt-out collective proceeding, finding that the PCR wasn’t suitable to represent the class as they had failed the authorisation condition. The CAT emphasised that to meet the authorisation condition it’s for the PCR to demonstrate that they have a good understanding of both the effect of the litigation finance terms being offered, and the overall context in which it’s being advised, including conflicts of interest. This was the first ever cross examination of a PCR, with Riefa being questioned on her understanding of the LFA and potential conflicts of interest that could arise. The CAT found that Riefa hadn’t demonstrated sufficient "independence or robustness so as to act fairly and adequately in the interests of the class".

This refusal to certify the claim sits as an outlier among the relative ease of obtaining a CPO following the lowering of the threshold for certification by the Supreme Court in Merricks.

What do these cases mean for the future of the opt-out collective proceedings regime?

As opt-out collective proceedings can be brought on behalf of millions of affected consumers, the legal fees are usually very high. Therefore, the availability of a third-party litigation funder, footing the legal costs, may be dispositive of whether the claim can begin in the first place.  

Litigation funding is a financial arrangement whereby a third-party investor provides capital to cover legal costs in exchange for a portion of the settlement or damages.

However, a funder expects a return on their investment, so the future of opt-out collective proceedings could be said to hinge on the attractiveness of the returns of funding collective proceedings.

What does this mean for competition lawyers?

The future of the opt-out collective proceedings regime appears to be at a juncture following the aforementioned developments. The increased scrutiny of litigation funding agreements, coupled with the recent setbacks in key cases, could make it harder to secure funding, limiting the scope and growth of future collective actions.

So, while it remains to be seen what the future holds, funders' attitudes should be watched with a careful eye.

Oliver Clarke is a trainee solicitor at RPC in the IP and technology team.