A drop in the ocean: Tribunal gives green light to small collective settlement in car shipping class action

18 December 2023

Last week, the Competition Appeal Tribunal (the Tribunal) published the first judgment approving a collective settlement since the UK class action regime came into force.

This follows a joint application for a collective settlement approval order (CSAO) made by the class representative, Mark McLaren, and Compañía Sudamericana De Vapores S.A. (CSAV), one of the twelve defendants in a follow-on competition damages claim arising out of the European Commission’s decision on maritime shipping of motor vehicles.  

Pursuant to section 49A of the Competition Act 1998 and Rule 94 of the Competition Appeal Tribunal Rules 2015, opt-out collective proceedings can only be settled with approval from the Tribunal. To approve a collective settlement, which binds all persons falling within the defined class, the Tribunal must be satisfied that the settlement terms are “just and reasonable” (applying factors set out in the Competition Appeal Tribunal Guide 2015 (the Guide)). 

Substantial evidence was filed by the class representative and CSAV in support of their application, including witness statements from the parties, their legal advisers, the claims administrators, the class representative’s economic expert and an independent lawyer addressing the merits of the proposed settlement. Notice of the application for a CSAO was also given to the class members, although no submissions were received by the Tribunal. Considering the factors in Rule 94 and the Guide, the Tribunal commented: “Litigation is expensive and uncertain; we cannot determine now, on an application like the present, the precise value of the claims, and what is subjectively speaking the amount that would be likely to be awarded by a Tribunal against this Defendant at the end of the day. However we are satisfied that both the damages sum and the cost sums are fair and reasonable.”  The settlement was therefore approved during the hearing on 6 December 2023. Given the size of the settlement as a proportion of the overall claimed damages, the Tribunal held that any distribution of the settlement sum to the class should be deferred until later. 

An interesting feature of this settlement agreement is that it includes a “reverter” mechanism, whereby CSAV will receive its settlement monies back on a “first in last out” basis in the event that any money is left after distribution to class members. The Tribunal considered that the reverter mechanism was “reasonable” but deferred any decision on this for a later date. 

Although this settlement is notable for being the first collective settlement that has been considered and approved by the Tribunal since the regime came into force, the amount of the settlement at £1.5m is a small proportion of the overall claim. By way of context, the economic expert advising the class representative valued the claims at £147m, but CSAV is the smallest defendant in these proceedings with only 1.7% market share. It remains to be seen the extent to which collective settlements of much higher value raise additional issues or call for further scrutiny.

One notable feature of the collective action regime that this judgment has brought into focus is the potential lack of confidentiality surrounding settlements. Typically, settlement negotiations between parties and any subsequent agreements are highly confidential. However, in this case, extensive details about the settlement amounts, the reasoning and to some extent the terms in the agreement itself are set out in the judgment and were made available in advance of the hearing. Whilst this is perhaps unsurprising given the need for a Tribunal application and transparency for class members, it will certainly provide parties with further considerations to bear in mind when entering into settlement discussions in similar cases.