All fair game? Collective proceedings in the CAT for alleged abuse of dominance

In a recent decision (Alex Neill Class Representative Limited -v- (1) Sony Interactive Entertainment Europe Limited (2) Sony Interactive Entertainment Network Europe Limited and (3) Sony Interactive Entertainment UK Limited (together Sony) [2023] CAT 73) the Competition Appeal Tribunal (CAT) has ruled on an application by a party for a collective proceedings order (CPO) to pursue collective proceedings for damages under section 47A/47B of the Competition Act 1998 (CA 1998) against Sony.

Background

The applicant, Alex Neill Class Representative Limited (Alex Neill), commenced proceedings in the CAT against Sony for anti-competitive behaviour namely abuse of their dominant position by unlawful conduct under Section 18 of the CA 1998. Alex Neill is a corporate entity, of which the sole director is Ms Alex Neill. Ms Neill is a consumer champion with circa 20 years’ worth of experience leading consumer campaigns.

The claim relates to the distribution of games which are played on the Sony PlayStation, a gaming console developed and sold by the Sony group of companies, and to the systems and structures that Sony has created around the PlayStation. This includes the online store (the ‘PlayStation Store’) through which Sony distributes digital versions of games which can be played on the PlayStation and also the PlayStation Network (or ‘PSN’), which is the online gaming platform that allows PlayStation users to interact with other players online. 

Sony is alleged to have abused its dominant position by imposing ‘unfair terms and conditions on PlayStation game developers and publishers’, including a 30% commission, which results in ‘excessive and unfair prices’ for consumers buying games or other content in the PlayStation Store. It is proposed that anyone who made purchases through the PlayStation Store from August 2016 would be part of the proposed collective action unless they opt out of the claim. Not surprisingly, given the popularity of PlayStation games, the claim has been valued at up to £5 billion.

The collective proceedings regime

Collective proceedings may be brought before the CAT by a certified class representative, combining two or more claims to which section 47B CA 1998 applies. Collective proceedings can include both opt-in and opt-out proceedings. The claim against Sony was proposed to be on an opt-out basis. 

Collective proceedings must be commenced by a person who proposes to be the representative in those proceedings, in this case Alex Neill. 

Collective proceedings may only be continued if the CAT makes a CPO. The CAT may only make a CPO if:

• it considers that the person who bought the proceedings is a person who the CAT could authorise to act as the representative (on the basis that it is just and reasonable for that person so to act in the proceedings); and
• the CAT considers that the proceedings are brought on behalf of an identifiable class of persons, raise the same, similar or related issues of fact or law (common issues) and are suitable to be brought in collective proceedings.

The recent decision relates to the hearing of the application for a CPO.

The CAT decision

The CAT granted the CPO. The CAT concluded that subject to Alex Neill revising the definition of the class members, the collective proceedings could go ahead. The original definition of the class members related to people who had purchased PlayStation games from August 2016 to the date of judgment or settlement. The CAT held that it is not possible to define the class by reference to forward-looking claims ie claims that may arise after the proceedings were commenced. Therefore, Alex Neill was required to amend the class definition so that it applies to parties as at the date the claim form was filed.

The CAT was satisfied that it is just and reasonable for Alex Neill to act as class representative in the proceedings and that was the case even though Ms Neill nor Alex Neill were members of the proposed class itself.

Funding issues

The CAT also held that a litigation funding agreement (LFA) that had been revised to take account of the Supreme Court’s decision in Paccar (see our article Litigation Funding – Supreme Court provides clarity on Litigation Funding Agreements | Hill Dickinson) was not a damages-based agreement (DBA) and so was not affected by arguments of unenforceability. It was accepted by the parties that the effect of the Paccar decision was that the original LFA in place was a DBA and was therefore unenforceable, as it provided for the funder to be paid on the basis expressly included a reference to the fee being determined as a percentage of the damages recovered by Alex Neill. As a result, Alex Neill and the funder entered into an amended LFA which was designed to get around the Paccar enforceability issues. The amended LFA provided that the funders fees would be determined by calculating a multiple of the ‘Costs Limit’ (being the amount of funding which the funder is contractually obliged to provide) as opposed to the previous position where the multiple was applied to the ‘Funder’s Outlay’ (being the amount actually drawn down). The use of a percentage of the ‘Proceeds’ (defined as the amounts recovered by Alex Neill through an order for damages or a settlement, including costs) to calculate the Funder’s Fee was made conditional upon that mechanism being enforceable and permitted by applicable law. 

Comment

The claim relies on the opt-out collective action regime introduced by the UK’s Consumer Rights Act 2015 which makes it easier for consumers and businesses to bring private actions for damages suffered as a result of competition law infringements on behalf of an entire class of claimants - in this case, PlayStation Store users. Whether Sony will now fight the claim or attempt to settle will be of interest. The sums at stake are great. 

This claim is the latest in a number of competition class action claims that have been filed before the CAT in the last 12 months. Similar collective actions have also been brought against other tech companies over alleged excessive commission fees. The CAT has recently certified a £920 million claim against Google, which alleged that Android device users overpaid for in-app content as a result of the company’s 30% commission charge on purchases made within apps downloaded via its Play Store. Similarly, Apple is meanwhile facing a claim for up to £1.5 billion for allegedly imposing unlawful 30% commission rates for purchases made within apps downloaded through its App Store, which the CAT also granted certification for in May 2023.

These are important issues for the tech industry and many will be watching carefully how these claims play out.

For further information on this topic, please contact Paul Walsh and Moya Clifford.