The Court of Appeal has recently upheld a High Court ruling that approximately 30 years’ worth of potential damages (amounting to £500 million) against Visa in the long running interchange fee dispute are time barred.
This judgment confirms that, unless a case concerns a “secret cartel”, the usual rules on limitation (being 6 years after the date the relevant damage is suffered) will apply to competition cases.
What has happened?
Various retailers, including the Arcadia Group, brought a claim in 2013 for damages against Visa, claiming that Visa had breached competition law by setting excessive interchange fees for the use of its cards. These “interchange fees” have been the subject of European and domestic investigations since around 1992 when the British Retail Association submitted a complaint to the European Commission. Arcadia’s claim for damages related to payments dating back almost 40 years.
Visa applied for strike out and/or summary judgment in relation to all alleged infringements that pre-dated July 2007, arguing all these were time barred. The UK retailers contended that the limitation period had not expired by virtue of section 32 of the Limitation Act 1980. This section provides that, if the relevant conduct has been concealed, limitation will only start to run from the time when the claimant discovered (or could have discovered) the behaviour in question. The claimants argued that facts relevant to their claim (for example how and at what level the interchange fees were set) had still not been discovered.
How do the courts interpret Section 32 of the Limitation Act?
Section 32 has been interpreted narrowly such that a limitation period is only suspended if facts required for a claimant to plead a statement of claim are unknown. Unknown facts which simply strengthen a claimant’s case are not sufficient to suspend limitation.
This helped Visa in this instance as there were a number of facts which had made their way into the public domain so that the UK retailers should have been aware of the potential to bring a claim against Visa. In particular, both the OFT and the European Commission had released decisions in the period up to 2007 which had made reference to anti-competitive behaviour in relation to interchange fees. Despite this, Arcadia’s claim was not issued until 2013.
The retailers had sought to argue that the general limitation principles should not apply to competition cases. They argued that the particular complexities of competition claims (including the need to show a restriction on competition and undertake an economic assessment of the damages that are claimed) means that these claims should be treated differently by the courts.
What did the courts conclude?
The Court of Appeal rejected the argument by the UK retailers and held that there was no reason to treat competition claims any differently to other claims when applying the law on limitation. In the High Court, Mr Justice Simon suggested that this broad brush approach may not apply to competition cases concerning “secret cartels” (where concealment of key facts means that claimants are consequently unable to find out about the events in question until long after the standard six year limitation has passed) but that due to the nature of the facts already in the public domain, this exception was not relevant to this particular case.
In his judgment, Mr Justice Etherington, (drawing on submission’s made by Visa’s counsel) noted:
“The appellents’ approach makes the most improbable assumption that the intention of Parliament in enacting section 32(1)(b) was that, even though a victim knows sufficient facts to be able to issue proceedings and plead a complete cause of action, the limitation period will nevertheless not commence until the victim discovered or could with reasonable diligence discover further facts”.
Outside of the realms of secret cartels, the message from the judiciary seems clear: competition cases will not be afforded any special treatment when it comes to an assessment of limitation.
Future impact of the EU Damages Directive
This message is complicated by the fact that the courts will soon be required to give special treatment to competition damages cases. Once the Damages Directive is implemented, by December 2016, the courts will need to apply bespoke limitation rules for competition damages cases. Under the new Directive, limitation periods shall not begin to run before the infringement in question has ceased, and relevant limitation periods will be suspended whilst any competition authority conducts its investigations.
The Court of Appeal explained that the Directive should not be applied in this case as it is not intended to have retrospective effect. Whilst this is of course correct and the Directive states this explicitly, it means that Arcadia have been caught in the unfortunate (and costly) position of bringing its claim too late to rely upon the current limitation rules and too early to rely upon the more claimant friendly rules envisaged by the Damages Directive. Indeed Arcadia’s counsel suggested (in the High Court) that this may lead Arcadia to attempt to resurrect this proportion of their claim once the Directive is in force.
Potential claimants considering bringing actions in the competition damages arena are already in a delicate situation as regards judging the timescales for when best to commence a claim. The inevitably secretive nature of the majority of anti-competitive arrangements combined with often long running and protracted regulatory investigations, at domestic and European level, means that 6 years can pass quickly without there being more than skeletal information in the public arena regarding the specifics of the infringement.
The decision as to whether to proceed on the basis of limited information is a risky one: a poorly pleaded claim will lead to a likely strike out application, and a claimant may previously have preferred to wait for more specific details to become available before making the commitment of issuing a public claim for damages.
Nevertheless, a “wait and see” approach may be riskyin the light of this judgment, at least until the Directive comes into force.