There’s method(ology) in the madness: expert methodology in CAT collective actions

It is well-established that expert methodology is fundamental to quantifying damages in competition claims. Buzzwords like counterfactuals, pass-on and regression analyses feature routinely at the CAT. For follow-on cartel claims, the discussion on expert methodology primarily trails the disclosure and witness evidence procedures. 

However, since the rise of the UK collective actions regime, expert methodology has become more front-loaded due to the requirement for collective actions to be certified by the CAT before substantive proceedings begin. The CAT’s gatekeeper role also requires the CAT to be satisfied that the expert’s report(s) establish a ‘blueprint to trial’.

At an early stage of the proceedings, experts must provide a sufficient level of detail to meet the CAT’s satisfaction and arguably navigate a fluctuating methodology threshold, whereby more recent certifications such as Gormsen v Meta¹ are trending towards a seemingly higher threshold. Whilst not based on merits, by the time the expert methodology reaches the CAT’s eyes, it must be fully articulated. This will have profound effects on claimant firms and funders when calculating expert costs (particularly in the pre-certification stage), and when such costs arise

Has the expert methodology threshold changed in 2024?

The Pro-Sys test, transplanted from Canada into UK caselaw, set the threshold floor for expert methodologies to meet the evidential hurdle required for the certification of a CPO. The expert methodology must not be purely theoretical, but plausible and grounded in facts.² It is a non-onerous low bar that only requires defeating strike-out/ reverse summary judgment.³ This caused a wave of collective claim filings, some of which have now passed certification. There is a general feeling among competition litigation practitioners that these types of claims have become increasingly creative, and true consumer claims have been strong-armed through the CAT by conjoining a competition law dimension. 

The CAT has since restricted the floodgates by expanding its ‘broad axe’ to protect defendants from litigating unviable proceedings. Since 2022, certain claims have failed certification and were invited to ‘have another go’.⁴

Having failed initially to evince an adequate expert methodology, and by corollary a suitable ‘blueprint to trial’, some of these claims are now passing the certification stage on the second attempt in 2024 (see Gormsen v Meta and Gutmann v Apple).

The CAT’s elucidatory approach has shed light on the level of granularity required for the blueprint. Every CAT ruling is assembling new criteria required to prove an adequate expert methodology. At the very least, these criteria are arguably not novel, but have now been elucidated expressly by the CAT and must be satisfied moving forwards. Amongst other things, the expert must:

1. Produce a methodology for each cause of action alleged.⁵
2. Identify the correct counterfactual of which there should only be one.⁶
3. Articulate fully the disclosure required by the defendant to avoid what the CAT calls the St. Augustine fallacy.⁷
4. Ensure the methodology is plausible/ credible.⁸
5. Identify loss on a class-wide basis, not a gain to the Defendant.⁹
6. Identify problems within their methodology with suggestions to overcome them¹⁰ and address issues raised by the Defendant(s) or the CAT. Even where a Defendant does not raise a point, the CAT¹¹ may, of its own volition, inspect any prospective issues which may derail the blueprint to trial.¹²

Whether the aforementioned criteria constitutes a higher threshold than the Pro-Sys test that the CAT started with may depend on which camp you reside in. Defendant-side parties might argue that the CAT has always necessitated this threshold to ensure that a claim is suitable for certification, whereas claimant-side firms and funders will lament that new rulings are supplying additional tick-box criteria that must be included in the methodology.

This writer avers that the requirements for new certifications are markedly different to previous rulings, and that certain CPOs which have already been granted would receive higher scrutiny, or even fail to meet the methodology threshold, if presented at a certification hearing now. An example is the Maritime car carriers claim.¹³ Here, the Appeal Court ruled that the CAT erred by stopping short of interrogating the PCR when the Defendants brought a rival theory of overall pricing. The Appeal Court was damning and criticised the CAT for not addressing the problem where it “seems almost inevitable that [the expert] will in due course have to modify or adapt its methodology to address the Appellants’ overall pricing case”. Here, the Appeal Court raised the bar. If the claim reached the certification hearing now, it is quite possible that it would not have been granted a CPO.

Hunter/ Hammond v Amazon carriage ruling

Carriage claims, where two competing PCRs clash to establish who is more suitable to represent the claimants, present a further complication, which also serves to bring expert methodology earlier in the process. In this ruling, the CAT had to decide which PCR was most suitable to apply for the CPO in relation to a case about whether Amazon Marketplace self-preferenced its own products and those who purchased its fulfilment services over other retailers.¹⁴ Crucially, the key differentiator between each of the PCR’s proposals was the expert methodology, in particular, the counterfactual identified. In the case of Hammond, his expert identified the correct counterfactual which was “closely aligned to the abuse”. Hammond’s expert methodology was clearly and distinctly better to articulating the claim. By providing a methodology that approximated the functioning of the Amazon algorithm, the CAT considered Hammond’s methodology to be favourable and allowed Hammond to proceed in a close fought race. Hunter/ Hammond has highlighted the importance of addressing the correct methodology and has introduced an element that further shifts the importance of expert methodology: not only will PCRs have to contend with ensuring they present an adequate methodology at certification, but may have to face the prospect of a show-down in the event of a carriage hearing.

Conclusion

Through its rulings, the CAT and Appeal Court have covertly made the expert methodology threshold more onerous. While each collective action runs on its idiosyncrasies, the threshold is difficult to pin down. At present, it is a tick-box exercise, to create a blueprint that is not at odds with the burgeoning caselaw.

The CAT’s level of scrutiny and increased level of review of expert methodologies appears higher than the low bar set in Merricks. Rather, by allowing cases to retry certification, the CAT has also allowed the Appeal Court to further elucidate on the threshold. Consequently, PCRs must seize expert advice earlier and, by the time of issue, it is highly likely that a number of expert reports will already have been drafted to explain the methodology proposed to help make good the PCR’s case. By shifting the engagement of experts earlier in the timeline, funders will need to outlay a higher budget for expert costs at the frontend of the proceedings.

Claimant firms must establish the blueprint, not only for the CAT, but also the funders to establish the viability of a claim. Subject to how Le Patourel¹⁵ deals with issues such as distribution, we may see funders adopting deviceful funding structures, such as co-funding with other funders/ claimant firms to distribute exposure on riskier claims. This need is compounded by the increased prospect that a second certification hearing may be required. For carriage claims, this is even more acute, as seen by the contest between Hunter/ Hammond, which pitted the experts’ methodologies against the other even before certification bringing the timeline even earlier. In any event, claimant firms will, like the threshold, continue to rise to the challenge and fight for recompense for consumers who have suffered detriment.

* Article first published in Thoughts4Leaders’ Competition Magazine.