UK competition: damages awards

United Kingdom

What’s the difference between theory and practice? In theory, there should be no difference but, in practice, there often is. In theory, it has for some time been possible to be awarded damages for anti-competitive behaviour by the UK courts. In practice, no one has actually done it. Until 2004, that is. In May, the Court of Appeal made the first damages award in a UK competition law case.

When the brewer, Courage, sued one of its former pub tenants, Mr Crehan, for not paying for his beer, Mr Crehan counterclaimed that he was forced under the terms of his lease to buy exclusively from Courage. This, he argued, was contrary to Article 81 of the EC Treaty which prohibits restrictive agreements affecting trade.

To succeed in his claim, Mr Crehan had to overturn the rule of English law preventing him from seeking damages if he were party to an illegal agreement. The issue was referred to the European Court of Justice which decided that the illegality rule was incompatible with EU law in situations where it failed to take account of the economic context and the relative bargaining positions of those involved.

Courage was in a strong bargaining position able to impose terms on its tenants, whereas Mr Crehan did not have the bargaining power to resist the contractual illegality and did not benefit from any unlawful conduct on his part. Although the High Court rejected his claim, the Court of Appeal accepted it and awarded him damages.

The judgment followed hot on the heels of another event which increased the UK courts’ authority in competition cases. From 1 May 2004, the European Commission’s ‘modernisation’ programme removed a long-standing obstacle which had limited the role of national courts (in all EU member states) in the private enforcement of competition law.

National courts are now able to decide whether restrictive agreements affecting trade can be exempted from the general prohibition in Article 81. Previously, proceedings in national courts had to be stayed while the question was decided by the European Commission.

These developments built on another important change in the UK judicial landscape: the introduction of the Competition Appeal Tribunal in June 2003 which can hear competition law cases based on decisions by the European Commission, the Office of Fair Trading or the utilities regulators that have jurisdiction in respect of competition matters.

Early impressions of the CAT are favourable: the CAT’s president is a senior and well respected competition law judge, formerly a QC and a judge of the European Court of First Instance.

Support is provided to the CAT by a competition service and a variety of experienced competition lawyers and economists. The CAT’s procedures are streamlined, blending rules of the European Court and the best of English common law. In this firm’s recent experience, cases are being dealt with both quickly and efficiently, as when the CAT quickly upheld the OFT’s decision to fine members of a cartel engaged in fixing football shirt prices.

Competition claims can also be brought before the High Court. This is the only option where the competition authorities have not ruled on an infringement. Although many perceived the High Court to lack the detailed specialist knowledge needed to hear complex competition law cases, any now brought will be heard by Chancery Division judges with special competition law training.

In practice, the CAT is likely to present the better option. Anyone who thinks his suppliers are keeping prices artificially high, or who can’t get supplies because he discounts, or who is being squeezed out by the anti-competitive behaviour of the dominant market leader, should first ask the OFT to investigate. Armed with an OFT decision, he can then seek damages in the CAT without having to re-prove the infringement.

The UK now has a first class forum for competition law claims. Anyone who might once have felt powerless in the face of anti-competitive behaviour now has a better chance of being able to do something about it.

Further details on how to bring a claim for infringement of competition law can be found in our Competition Survival Pack, a hands-on practical guide to EU and UK competition law available online at: