This article first appeared in Law News Issue 34 (3 October 2014), published by Auckland District Law Society Inc.
Class actions seeking compensation for breaches of competition law are becoming more common in Australia. Despite the absence of specific legislation, it is possible that such claims could be brought in New Zealand under the Commerce Act 1986 and the High Court Rules (especially where the Commerce Commission has already taken successful enforcement action against the members of a cartel).
Competition class actions in Australia
Class actions (or “representative proceedings” as they are known under Part IVA of the Federal Court of Australia Act 1976 (Cth)) continue to increase in number and value, and are now considered a common feature of commercial life in Australia. Most have focused on breaches of continuous disclosure rules, but several high-profile claims have been brought on the back of actions commenced by the Australia Competition and Consumer Commission (ACCC).
Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd was the first competition class action in Australia. It alleged price-fixing in relation to various vitamins used in the production of animal feed and animal feed supplements by three multinational pharmaceutical companies, and was brought on behalf of a wide class of parties who had purchased products from the cartel. Commenced in 1999, it was finally resolved in 2006 when the Federal Court of Australia approved a settlement under which the pharmaceutical companies would pay A$30.5 million to the claimant class (plus A$10.5 million in costs).
Jarra Creek Central Packaging Pty Ltd v Amcor Ltd was commenced in 2006, following an ACCC investigation into alleged price-fixing in cardboard packaging markets. It was settled in 2011, with the defendants paying a total of A$95 million (plus A$25 million in costs).
Wright Rubber Pty Ltd v Bayer AG concerned an alleged conspiracy to fix the price of rubber chemicals sold in Australia between 1995 and 2001. This case was much smaller than the cardboard packaging class action. It ran from 2007 to 2011, when it was settled for A$1.5 million (representing 70% of the represented claimants’ losses).
De Brett Seafood Pty Limited v Qantas Airways Limited was the most recent competition class action to be resolved. It was commenced in 2007, following an ACCC investigation into alleged price-fixing of fuel and security surcharges by airlines between 2000 and 2007. In June 2014, the Federal Court approved a settlement agreement under which some of the airlines would pay A$38 million by way of compensation (proceedings against others were discontinued without compensation being paid).
Scope for competition class actions in NZ
Private actions for breaches of the Commerce Act can be brought under section 82 (which makes a party liable for loss caused by anti-competitive conduct) or section 84A (which makes a party liable for loss caused by an anti-competitive transaction). Neither section makes express provision for any form of collective private actions.
However, there is general provision for such actions in High Court Rule 4.24. That Rule does not in fact provide for “class actions” in the US sense. Claims instead proceed by way of “representative action”.
The Rule provides that a person may sue another on behalf of all persons with the same interest in the subject matter of a proceeding, either with the consent of those other persons or as directed by the Court. Where it is impracticable to obtain consent, the Court may be asked to make a “representative order” establishing the action.
Several “follow-on” actions have been brought in recent years by individual plaintiffs claiming to have suffered loss as a result of price-fixing (including in the credit card interchange fee and air cargo cases). No representative actions alleging breaches of the Commerce Act have yet made it to court, however.
That is not to say that such claims are impossible. There is no clear reason why, as the Commerce Act and High Court Rules are currently drafted, claims for compensation would not be permitted to proceed on a collective basis. They would of course not be immune to the problems which so often beset class actions in other contexts. It would be necessary not only to marshal the claimant class, find an appropriate litigation funder and legal adviser, and satisfy the court that a representative order should be made, but also to grapple at trial with the problematic issue of causation of damage. Nevertheless, with Australian litigation funders and law firms becoming more active on this side of the Tasman, it may just be a matter of time before we start seeing competition class actions in New Zealand.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.