Judgment (CPO Application)

Judgment of the Tribunal in respect of an application by Dr Liza Lovdahl Gormsen, as proposed class representative (“PCR”), for a collective proceedings order (“CPO”) pursuant to section 47B of the Competition Act 1998 (“the Act”) (“the CPO Application”). 

The Applicants seek permission to bring a “standalone” claim alleging an abuse of a dominant position by three corporate members of the Meta group (“the Respondents”) in breach of the Chapter II prohibition of the Act. The Meta group, among other things, owns and operates Facebook, a widely used social network.

Specifically, the PCR contends that the Respondents imposed complex and far-reaching terms of business on those who wished to use Facebook (“Users”), including requiring Users to give Facebook permission to collect, share and otherwise process personal data and to view targeted advertising alongside other content on Facebook (“the Unfair Data Requirement”). The Respondents did not pay Users for access to, or its use of, their personal data. The PCR contends that the Respondents then charged advertisers significant sums to show highly targeted adverts to Users based on their personal data. The PCR contends that the fact that the Respondents did not pay Users for access to, or use of, their personal data, constituted the imposition of an “Unfair Price” on Users. Finally, the PCR contends that the fact that Facebook’s terms and conditions were complex, far-reaching, opaque and/or misleading, and imposed on a “take it or leave it” basis constituted “other Unfair Trading Conditions”. The CPO Application contends that the Unfair Data Requirement, the Unfair Price, and the other Unfair Trading Conditions, are three distinct abuses of dominance by the Respondents. The PCR relies on two expert reports by Mr Harvey, an economic expert, that purport to outline a methodology for assessing the quantum of the loss to the proposed class as a result of the abuses alleged.

The Tribunal found significant problems with the pleaded claims in the CPO Application and with the methodology proposed by Mr Harvey. Specifically, the Tribunal found that the proposed legal basis for assessing compensation owing to the class varies materially between the three alleged abuses, whereas Mr Harvey’s economic analysis seeks to provide a singular response to the Respondents’ alleged wrongs. Furthermore, Mr Harvey’s analysis fails to consider the two-sided nature of the relevant market, and risks incorrectly matching alleged “excess profits” earned by the Respondents from advertisers with alleged losses suffered by Users.

The Tribunal considered that there were two key points to address in order to determine the CPO Application: (i) whether the CPO Application met the test in Pro-Sys Consultants v. Microsoft (“the Pro-Sys test”); and (ii) whether, under rule 79(2)(b) of the Competition Appeal Tribunal’s Rules, the continuation of the proceedings could be justified in terms of cost/benefit.

The Pro-Sys test is designed to ensure that before a CPO is made, the Tribunal is satisfied of the various steps that must be taken so that the proceedings can be heard effectively and efficiently. In relation to (i), the Tribunal found that the PCR had failed to meet the Pro-Sys test because of inadequacies identified in the pleading of the abuses alleged in the CPO Application, and the methodology proposed by Mr Harvey for the quantification of loss. The Tribunal considered that there is no effective blueprint for the efficient and effective trial of the issues raised by the PCR.

In respect of (ii), the Tribunal considered that the problems identified in respect of the application of the Pro-Sys test to the CPO Application mean that no cost/benefit analysis can be properly carried out at this stage.

For the reasons set out in the Judgment, the Tribunal proposes to stay the CPO Application for a period of six months to enable the PCR to file additional evidence setting out a new and better blueprint for the effective trial of the proceedings. Absent a new and better blueprint, the Tribunal will lift the stay and reject the CPO Application. If a new and better blueprint is produced, the Tribunal will give appropriate directions for the determination of the renewed application.