Gutmann v First MTR South Western Trains Limited and others:

The case concerns two separate claims against SW and SE, alleging they abused their dominant positions contrary to Section 18 and Chapter II of the Competition Act 1998 (the “Act”) by failing to make Boundary Fares “sufficiently available” and/or to use their “best endeavours” to ensure customers were aware of Boundary Fares.⁴ The result was that certain customers with travelcards were overcharged by purchasing fares covering their whole journey (including to destinations already covered by their travelcard), rather than just the Boundary Fares to supplement their travelcard. The claims against SW and SF were heard together as the issues raised in both proceedings were almost identical.

CPO proceedings

Mr Gutmann, acting as class representative, issued the opt-out collective action claim in February 2019 on behalf of customers who purchased a rail fare that was not a Boundary Fare, despite holding a travelcard for part/all of the journey covered by the rail fare, between 1 October 2015 and until final determination by the CAT (or the earlier settlement of these claims).

Mr Gutmann estimated the relevant class sizes as follows:

1. for the claim against SW: between around 1.1m and 10.3m customers (with a central estimate of 2.1m), seeking c.£57m in aggregate damages; and
2. for the claim against SE: between around 472k and 5.8m customers (with a central estimate of 885k), seeking c.£36m in aggregate damages.

The damages were calculated based on the estimated number of journeys taken by the class members and the difference between the full journey fare and corresponding Boundary Fare, on the assumption that customers would not have knowingly paid twice for their journeys.

SW and SE objected to the granting of CPOs, arguing that the claims were not eligible for inclusion in collective proceedings. SW and SE separately cross-applied for summary judgment and/or that the claims be struck out on the basis that they had no arguable prospect of success.

⁴A form of extension ticket used to travel beyond the boundary of a customer’s travelcard to their destination.

SE and SW’s cross-application for summary judgment and/or strike out is dismissed

As in Le Patourel v BT, the CAT confirmed that the relevant test for summary judgment and strike out is whether the claim has a “realistic” rather than a mere “fanciful” prospect of success. SE and SW objected to Mr Gutmann’s claims on the basis that competition law was not intended to act as a “general consumer protection law”. They argued that the duty alleged by Mr Gutmann for SE/SW to make Boundary Fares available or make customers aware of them went too far. SE/SW pointed to several European judgments to support this position, arguing that the responsibility placed on SE and SW as dominant companies was not the same as a fiduciary duty to protect consumers’ interests.

The CAT did not find SE/SW’s arguments sufficient to dispose of the claims at this stage of the proceedings. In particular, the CAT indicated that SE/SW, as dominant companies, had a special responsibility to avoid exploitative abuse and it was relevant in this case that end consumers (mainly individuals) had been double-charged rather than companies/businesses. Interestingly, whilst the CAT acknowledged that competition law was not the same as consumer protection law, this case was nevertheless not a “dramatic extension” of existing competition law,⁵ which looks to substance rather than form.

SE/SW also criticised the claims for being too vague and not making clear precisely what steps SE and SW should have taken to make Boundary Fares available/customers aware of them. The CAT also dismissed this objection, noting that (i) the claims did clearly specify what SE and SW should have done and (ii) abuse can still take place even without a specifically identified counterfactual.

The eligibility condition is satisfied

After determining that the claims had sufficient merit to proceed, the CAT examined whether the “eligibility condition” was satisfied. SE and SW contended that it was not satisfied on the basis that: (i) there were limited or no common issues for the class members (i.e. the “commonality requirement”), with not all class members suffering the same (if any) loss; and (ii) the need for an individual factual assessment to determine whether Boundary Fares were “sufficiently available” for each class member meant the claims were unsuitable for collective proceedings.

The CAT dismissed SE’s and SW’s arguments, holding that there were common issues at play for the class members. The CAT’s finding was based on an assessment of Canadian case law, holding that it was a plausible contention (which did not require an assessment of each relevant customer) that the overwhelming majority of customers who were entitled to a Boundary Fare would not have paid more than was necessary. This plausible contention defined the limits of the class.

Canadian case law

All parties referred to an extensive body of Canadian cases to support their arguments on the commonality requirement and the CAT confirmed the persuasive force of Canadian case law given the greater experience of Canadian courts in dealing with class actions compared to the relatively immature UK regime. The CAT helpfully set out the following principles which can be applied to the UK regime based on Canadian case law:

1. common issues should be interpreted purposively, having regard to the object of the collective proceedings regime;
2. common issues do not have to predominate over non-common issues;
3. commonality refers to the question not the answer, such that a common issue does not need all class members to have the same interest and there can be significant differences between the position of various class members, so long as the common issue advances the litigation as a whole; and
4. expert evidence designed to show a common issue must be sufficiently credible to establish a basis in fact for the commonality requirement, but this is not an onerous evidential test.

Common issues: dominance and causation

The CAT considered whether dominance and causation were common issues in this case, against the background of the Canadian case law.

1. Dominance: SE contended that its market dominance was not a common issue, arguing that the relevant market definition varied between different types of passengers and different times/starting locations of passengers’ journeys. The CAT dismissed these arguments, holding that there was ample evidence to demonstrate dominance was a common issue.
2. Causation: SE and SW both argued that there were numerous circumstances where a passenger who was entitled to and aware of a Boundary Fare may not have purchased one, and therefore would not have suffered any loss. The CAT discounted all but one of these examples,⁶  which the CAT did exclude from the class definition.

The CAT recognised that the common issues identified in these proceedings do not arise equally for the claims of all class members. However, it found that the way in which these issues arose for each class member are sufficiently similar to constitute common issues.

The CAT rejected SE’s argument that the eligibility condition for collective proceedings is not satisfied if more than a minimal number of class members suffered no loss. Instead, this was a consideration that should be taken into account when calculating aggregate damages. The CAT held that, so long as there is a plausible method to estimate the aggregate damages, the claims are suitable to be brought collectively despite any individual aspects of causation.

Gutmann put forward a plausible and credible methodology for calculating aggregate damages

The CAT confirmed that claimants must put forward a “plausible and credible” methodology for calculating damages on an aggregate basis, although an exact loss figure is not required. In this case, the CAT found the methodology set out by Mr Gutmann’s expert competition economist (Derek Holt) met this requirement, such that the claims were appropriate for collective proceedings. Helpfully for future claimants, the CAT also confirmed that a full explanation of how the quantification analysis will be carried out is not necessary at this stage of proceedings.

Some of the CAT’s key findings with respect to Mr Holt’s calculation methodology are set out below.

1. Preliminary estimated data can be used at this stage of the proceedings, with further analysis conducted if the claim proceeds to trial.
2. As stated in Section 47B(11) of the Act, class members must reside in the UK at the date specified in the CPO. Therefore, any calculation methodology should estimate the value of non-UK residents’ claims and subtract this from the total aggregate damages.
3. The CPO application stage is not the appropriate time for a full evaluation of an expert’s methodology, which is reserved for the trial stage. The CAT repeated the point made in Merricks v Mastercard that the use of estimates and assumptions is not only acceptable but may actually be indispensable when quantifying damages at trial.
4. Expert evidence at this stage needs only to outline the quantification methodology and identify the data used. There is no need to provide a “detailed elaboration” of how the analysis will actually be carried out.

The CAT’s cost-benefit analysis argued against granting the CPO

The CAT conducted a cost-benefit analysis to determine whether it should grant a CPO.

Factors against granting the CPO included that (i) the potential recovery for each individual class member is uncertain; (ii) the claim would incur a substantial cost (with Mr Gutmann’s budget estimated at over £11m) and place demands on CAT resources; (iii) the recovery for each individual class member is likely to be small, and the proposed method of distributing these recoveries is likely to mean that many class members will not come forward to receive their damages; and (iv) on that basis, the proceedings may principally benefit the parties’ lawyers and the litigation funder, which would take a share of the undistributed damages.

Factors for granting the CPO included that (i) Mr Gutmann can reconsider the proposed distribution method in light of the guidance provided by Merricks v Mastercard; (ii) litigation funding is necessary for many collective proceedings and a commercial funder will not take on the risk involved in bringing these proceedings unless it stands to make a significant profit; and (iii) in addition to compensating class members, claims such as this can promote justice and efficiency by ensuring wrongdoers modify behaviours that may harm the public.

The CAT found this cost-benefit analysis came out slightly against the granting of the CPO. It is notable that the CPO was still granted despite this finding, which the CAT did not address again in the judgment.

The claims satisfied the suitability condition

The CAT determined that the claims are “suitable to be brought in collective proceedings”, since there is no realistic prospect of class members bringing their low-value individual claims given the disproportionate costs and time this would require. The CAT considered numerous factors in reaching this conclusion, including that: (i) no individual claim had been brought by any class members (and none were likely to be brought); (ii) it should be possible to identify whether any person is a class member; (iii) the claims are appropriate for an aggregate damages award; and (iv) there are no alternative means of resolving the dispute.

⁵ In particular because Boundary Fares were (i) not available from certain outlets used by customers to buy tickets and (ii) not made apparent to customers when they were available.

⁶ This related to passengers who bought a point-to-point fare for the portion of their journey between the last station covered by their travelcard and their destination, thereby mitigating/avoiding any loss they suffered.

This judgment provides further assurance to prospective claimants that the threshold for certification of a collective action is very low. The CAT’s rejection of SE/SW’s arguments for strike out/summary judgment make it increasingly clear that defendants have a high bar to clear if they seek to argue that the claimants have no arguable prospect of success at this stage.

The judgment is also welcome news for consumers, with the CAT dismissing SE/SW’s position that the claims constituted an overreach of competition law into general consumer protection law. The CAT’s emphasis on dominant market players’ special responsibility to protect the interests of end consumers may herald an expansion of the UK collective action regime, encouraging further consumer action claims under the umbrella of a competition law framework. This is likely to be of particular interest to those who brought data privacy breach claims under CPR 19.6, which have fallen away in the wake of the Supreme Court’s decision in Lloyd v Google.⁷

It will be less welcome for litigation funders and claimant lawyers that the CAT’s detailed cost-benefit analysis came down against the granting of a CPO, based on an assessment of the potentially disproportionate benefits of collective actions for them as opposed to consumers. These groups will doubtless be interested to see further judgments of the CAT discussing the significance of the cost-benefit analysis, given the CAT did grant the CPO in this case notwithstanding the contrary results of this analysis.

The judgment is being appealed, with the appeal hearing on track to take place in May 2022.

⁷[2021] UKSC 50.