Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/521742
18 | 5TH - 11TH JUNE 2015 | UTILITY WEEK Policy & Regulation Market view W hen the Consumer Rights Act 2015 comes into force on 1 October this year, it will hand consumers and small and medium-sized enterprises (SMEs) new powers to bring claims for damages for any overcharged paid for goods or services as a result of anti-competitive behaviour. Representatives will be able to bring col- lective actions on behalf of a group of con- sumers and, for the first time, actions for damages may be brought on an opt-out basis, with those that have suffered loss being automatically included in the claim unless they specifically withdraw. In paral- lel, new EU law will also make it easier to recover any alleged overcharges. A rise in the number of claims against utility providers – whose billing errors still cause common aggravation – is therefore expected, especially where large numbers of consumers have suffered a relatively small loss – which represents a cumulatively large figure. The pending changes reinforce the importance of effective competition com- pliance and corporate governance against the prospect of fines of up to 10 per cent of worldwide turnover and unlimited dam- ages claims. The utilities sector has already wit- nessed cases of alleged collusion among competitors or abuse of dominance by an incumbent market player. Cartels and anti-competitive practices have previously been found in a range of activities, from meters to power exchanges. One of the longest-running claims was brought in 2008 by National Grid against ABB, Siemens and others, relating to alleged losses suffered as a result of an EU- wide cartel in gas-insulated switchgear. This claim, which saw ABB seeking dam- ages of £108 million, ran for five years, and an undisclosed settlement was agreed just before the trial. And independent supplier Albion Water secured damages of £1.7 million from Dwr Cymru Welsh Water aer the UK competition authorities decided that the company had abused a dominant position across its water supply network. The Consumer Rights Act 2015 brings further changes. From October, the UK's specialist competition court, the Competi- tion Appeal Tribunal (CAT), will be handed new powers to order that anti-competitive behaviour is stopped and the right to hear a wider range of cases. Significantly, cases brought by small or medium-sized under- takings will be considered for a fast-track procedure designed to make it cheaper and quicker for SMEs to seek redress. The CAT may place a cap on costs and can also restrict the amount of evidence and number of expert witnesses. The new act also intro- duces a mechanism under which infringing companies can propose voluntary redress schemes to compensate victims, which may be approved by the CMA. Alongside the UK legislation, the EU has adopted a directive on antitrust dam- ages actions that will help remove obsta- cles for claimants across Europe. This must be implemented in national legislation by 27 December 2016. Leniency statements containing admis- sions by whistleblowers will, from then on, receive blanket protection from disclo- sure. This recognises that whistleblowers are more likely to participate in leniency schemes if their confessions of wrongdoing are safe from disclosure to damages claim- ants. Currently, before disclosing leniency statements, national courts must balance the interests of leniency schemes and the claim- ant's right to damages. The protection of leniency statements may appear to deter, rather than encourage, damages claims. However, the expectation is that more leniency applications will be made, which will in turn drive the number of damages claims. The directive also protects leniency applicants against the liability, where each cartelist is generally held to be responsible for the entire loss caused by the cartel. This makes leniency applicants who do not fight cartel charges vulnerable to early claims. While the directive offers leniency applicants protection from damages claims for the loss caused by the other cartelists, claimants will be required to have exhausted redress from the other cartelists before taking such action. Importantly, there will be a rebuttable presumption that established infringements have caused harm. The courts will be able to quantify the harm suffered by the claim- ant where it may be practically impossible or excessively difficult for the claimant to quantify harm on the basis of the evidence. The new law also places beyond doubt some important legal issues about who is able to sue, for example, by clarifying the availabil- ity of a defence that a purchaser passed on any cartel overcharge to its own customers, with no loss suffered by the claimant. In such cases, the indirect purchaser to whom the overcharge was passed may be able to claim. Finally, decisions of national competition authorities will carry greater weight than they currently do before the courts of other member states. To understand the potential risks of the new landscape, utilities should assess where they might encounter competition risk. A company can gain protection from fines by seeking leniency from a competition author- ity, but there is no similar protection avail- able against damages claims. Faced with the prospect of a significant reputational and financial fallout, compa- nies across the utilities sector should revisit their compliance programmes to ensure they are sufficiently robust. At board level, direc- tors must take an even greater role in ensur- ing that effective compliance is embedded in the corporate culture, across the entire organisation. Catriona Munro, partner in the EU competition and regulatory team, Maclay Murray & Spens Why claims risks are rising Britain's utilities will face heightened regulatory risks and public scrutiny when the Consumer Rights Act 2015 comes into force, according to Catriona Munro. "The pending changes reinforce the importance of effective competition compliance against the prospect of fines of up to 10 per cent of worldwide turnover and unlimited damages claims"