An application for a voluntary redress scheme can be made by a single entity or on a group basis (by multiple parties implicated in an infringement). In practice, it will be challenging to agree a settlement scheme which does not involve all (or at least the majority) of participants in the infringement in any cartel investigation under Article 101 TFEU given that the cartelists are jointly and severally liable for the entire loss caused by that infringement. This means that, even if a company agrees a scheme to compensate its customers, it will potentially be liable to be joined to proceedings either: (i) as a primary defendant to a claim by a purchaser of the affected product even if that purchaser did not have any relationship with that company; or (ii) as a defendant to contribution proceedings, whereby the primary defendants look to recover a portion of the damages claimed or awarded against them.
The scheme can relate to an infringement found by: (i) the CMA (in respect of which it is possible to make an application prior to the decision being reached); or (ii) by the European Commission (in respect of which applications can only be brought post-decision).
In the case of a CMA investigation it is possible to submit an outline scheme to the CMA at any time during the investigation although in practice it would be challenging to do so prior to the CMA issuing its statement of objections (setting out its case against the parties under investigation). The CMA guidance makes it clear that it would not view an application for a compensation scheme as being an admission of liability or in any way inconsistent with the applicant continuing to exercise its rights of defence – although of course the reality is that it would be challenging for a party under investigation to simultaneously credibly defend its conduct while also entertaining a settlement scheme.
The first stage for a potential applicant is to present an outline scheme to the CMA. The CMA will then consider the outline scheme and makes it clear whether it intends to prioritise assessment of an application.
If the scheme is to be prioritised, the next stage is to submit a formal application using the standard form. The application form requires the applicant to set out:
- The start date, terms and duration of the redress scheme (which must be at least nine months);
- Persons entitled to claim compensation under the scheme (including: (i) whether the scheme will compensate indirect purchasers as well as direct purchasers; and (ii) whether the scheme will extend to “umbrella” damages9);
- The scope and level of compensation to be offered under the scheme (including whether the scheme will only compensate for harm suffered in the UK or also elsewhere – this will be a particular issue where the scheme results from a European Commission investigation);
- The process for applying for compensation under the scheme (including the estimated time it will take to determine applications for compensation) together with: (i) the evidence that applicants will be asked to submit in connection with their application for compensation; (ii) how the scheme is to be advertised; (iii) the complaints procedure; and (iv) the consequences of accepting compensation under the scheme.
An applicant will be required to appoint a chairperson who will be responsible for assisting in devising the terms of the scheme and deciding whether to recommend the scheme to the CMA. There are strict requirements as to who can act as a chairperson – only senior lawyers and judges (ideally with experience and knowledge of competition law) will qualify for this role.
The chairperson is then responsible for appointing board members which must include: (i) an economist; (ii) an industry expert; and (iii) a person to represent the interests of the victims of the infringement who will be entitled to claim compensation under the scheme.
The chairperson and the board will have the task of determining the methodology for assessing the level of compensation payable to each applicant. In addition to the compensation payable under the scheme, the parties seeking to set up the scheme will also be required to pay the fees of the chairperson and the board members and the CMA’s costs in relation to the scheme.
Once the scheme is formally approved by the CMA, the infringing party has a statutory duty to comply with it. Failure to do so could result in private legal proceedings or enforcement action by the CMA.