Damages: A Class Act to Follow?

Author:Mr Guy Lougher
Profession:Pinsent Masons
 
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Which?, the former Consumers' Association, is bringing the UK's first representative action for damages against JJB Sports (JJB) on behalf of consumers who purchased football shirts at cartelised prices in 2000-2001. This action, under the Competition Act 1998, follows the Office of Fair Trading's (OFT) infringement decision in 2003 against JJB, Umbro, Manchester United and other retailers of replica England and Manchester United football shirts.

In the claim, which was lodged on behalf of 130 consumers earlier this year with the Competition Appeal Tribunal, Which? is seeking compensation for each overpriced shirt purchased, whether from JJB or another retailer, together with costs, interest and exemplary damages equal to 25% of JJB's turnover. JJB therefore faces the possibility of further financial penalties, having already paid out 6.7 million in fines.

The other cartel participants appear, however, to have escaped damages claims as the two year limitation period expired prior to Which? achieving its status as a body designated to bring actions on behalf of consumers (JJB appealed the initial decision, which had the effect of extending the limitation period in respect of JJB only).

Comment

The OFT's current consultation on private actions in competition law and the European Commission's Green Paper both seek to address the current obstacles to private actions, which are seen as necessary to complement the enforcement powers of the competition authorities.

Whilst the risk of damages actions has long been a theoretical one for companies found to be in breach of competition law, the JJB case highlights that consumers, and the organisations representing them, are now more likely to take action. The current focus on damages actions may also lead companies to consider claiming damages from their suppliers if they have been paying higher prices as a result of cartel behaviour.

As with all litigation, defendant companies should keep in mind the possibility of reaching a settlement out of court, thereby hopefully reducing costs and the amount of any compensation payable. Indeed, in the current case, Which? has indicated that the next stage of the proceedings has been postponed until June 2007, pending negotiations with JJB.

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