London & South Eastern Railway Ltd & Ors v Gutmann

Factual and Procedural Background

This opinion concerns an appeal against the judgment of the Competition Appeal Tribunal ("CAT") dated 19th October 2021, which granted collective proceedings orders ("CPOs") in two cases brought pursuant to section 18 of the Competition Act 1998 ("CA 1998") relating to the Chapter II prohibition on abuse of dominant position. The claimants, represented by a class representative, alleged that the defendants, train operating companies ("TOCs"), abused their dominant position by failing to make "Boundary Fares" sufficiently available to consumers holding valid "Travelcards" issued by Transport for London ("TfL").

Travelcards permit unlimited travel within specified TfL zones, mainly zones 1 to 6, covering almost all valid Travelcards. Boundary Fares are supplementary tickets intended to cover travel from the outer boundary of a Travelcard zone to a destination beyond. The claim alleges that the TOCs failed to make Boundary Fares adequately available, resulting in consumers being effectively double-charged for part of their journey.

The claims relate exclusively to journeys originating from London zones outward, covering approximately three million individuals with estimated individual losses of £33-£55 and a total claim of about £93 million. Two rail franchises are involved: the South-Western and South-Eastern franchises, with relevant defendants holding the franchises during the specified periods.

The CAT certified the claims on an opt-out basis, including all persons domiciled in the UK who fall within the defined class. The defendants unsuccessfully sought strike out or reverse summary judgment. The CAT also approved the class representative’s expert methodology for proving common issues and aggregate damages under section 47C(2) CA 1998 and ordered the claims to proceed collectively.

The case involves complex arrangements under a Travelcard Agreement between TfL and the TOCs, governing the provision and apportionment of Travelcard revenues. Evidence showed limited availability and awareness of Boundary Fares across various sales outlets, including ticket counters, vending machines, online platforms, and third-party sellers.

Legal Issues Presented

1. Whether section 47C(2) CA 1998 permits aggregation of liability issues (causation and proof of loss) in collective proceedings or requires individual assessment of each class member’s liability.
2. Whether the class representative’s expert methodology meets the Microsoft test for certification, particularly in light of aggregation of liability.
3. Whether the CAT erred in its cost/benefit analysis and costs budgeting relating to the certification of the collective proceedings order.
4. Whether the CAT erred in refusing to strike out parts of the claim alleging abuse arising from failures by third-party ticket sellers to honour Travelcards and the failure to offer Boundary Fares for all ticket types, including discounted fares such as Advance Fares.

Arguments of the Parties

Appellants' Arguments

• Section 47C(2) does not cover liability issues, only damages quantum, and thus the CAT erred in allowing aggregate liability; each class member’s loss and causation must be individually proven.
• The Supreme Court’s judgments in Merricks and Lloyd do not conclusively support aggregation of liability, and factual distinctions in the present case (presence of no-loss claimants) make Merricks distinguishable.
• The class representative’s expert methodology failed the Microsoft test: it was speculative, incomplete, relied on an unperformed survey, and assumed all consumers suffered loss, reversing the burden of proof and risking overcompensation.
• The CAT erred in its cost/benefit analysis by relying on outdated and underestimated costs budgets and failing to properly weigh the high costs and limited consumer benefit.
• The claim should be struck out in part because third-party ticket sellers are independent and the TOCs are not liable for their failure to honour Travelcards or offer Boundary Fares.
• The CAT erred in not dismissing the claim that Boundary Fares should be available for all ticket types, including discounted fares, arguing that discounted fares need not be combined with Boundary Fares.
• Various categories of consumers identified by defendants would not have suffered loss, undermining commonality and suitability for collective proceedings.

Appellees' Arguments (Class Representative and Supporting Respondents)

• Section 47C(2) CA 1998 permits aggregation of liability as well as quantum, supported by binding Supreme Court authority and consistent with the purpose of collective redress.
• The expert methodology meets the Microsoft test; the methodology is sufficiently credible and plausible, identifies issues for trial, and can be refined post-disclosure and at trial.
• Surveys are a standard and acceptable method for gathering data and need not be fully designed or conducted at certification stage.
• The assumption that rational consumers would opt for the lowest fare is a common-sense starting point and does not reverse the burden of proof.
• The CAT appropriately balanced cost/benefit considerations and maintains control over costs throughout the proceedings.
• Third-party sellers act as agents or under arrangements that render TOCs liable for their conduct; liability for umbrella pricing applies.
• Failure to offer Boundary Fares for all ticket types, including discounted fares, is arguable abuse and a matter for trial; Boundary Fares are not discounts but represent payment only for the journey portion not covered by the Travelcard.

Table of Precedents Cited

Court's Reasoning and Analysis

The court systematically addressed each issue raised on appeal, applying established legal principles and relevant case law.

Regarding the scope of section 47C(2) CA 1998, the court held that the provision encompasses not only quantum but also liability issues, including causation and proof of loss. This interpretation aligns with the Supreme Court’s decisions in Merricks and Lloyd and supports a purposive construction aimed at ensuring the collective redress regime is workable and effective. The court rejected arguments that factual distinctions or statutory language restricted section 47C(2) to damages quantum alone, emphasizing the practical necessity of aggregate liability to avoid unmanageable individual assessments.

On the adequacy of the class representative’s expert methodology, the court applied the Microsoft test, which requires that the methodology be sufficiently credible or plausible to establish some basis in fact for commonality. The court recognized the methodology as necessarily counterfactual and hypothetical but found it grounded in available data and capable of refinement following disclosure. The court dismissed challenges to the reliance on a future survey and the assumption that rational consumers would seek the lowest fare, concluding that the CAT properly exercised its broad discretion and gatekeeper role in certification, including the use of the "broad axe" approach to practical justice.

The court also addressed concerns about cost/benefit analysis and costs budgeting. It found no error of law in the CAT’s assessment, noting that the appellants’ evidence of increased costs was not before the CAT at certification and that the CAT retains close control over costs to ensure proportionality. The court further rejected speculative arguments that awards would go unclaimed, observing that the CAT has discretion to consider alternative distribution methods to maximize consumer benefit.

Regarding the refusal to strike out claims related to third-party ticket sellers and the failure to offer Boundary Fares for all ticket types, the court found these issues to be properly arguable and matters for trial. It accepted the CAT’s reasoning that TOCs may be liable for agents’ conduct and that the failure to offer Boundary Fares, including in conjunction with discounted fares like Advance Fares, could constitute abuse under the Chapter II prohibition. The court emphasized relevant case law establishing that unfair pricing and lack of transparency by a dominant undertaking can amount to abusive conduct, and that the CAT correctly rejected premature dismissal of these claims.

Holding and Implications

The court DISMISSED the appeals in their entirety.

The effect of this decision is to uphold the CAT’s certification of the collective proceedings order, allowing the claims alleging abuse of dominance by the TOCs to proceed on an aggregate basis under section 47C(2) CA 1998. The court confirmed the broad scope of the collective redress regime, including the aggregation of liability issues, the acceptance of expert methodologies meeting the Microsoft test, and the appropriateness of certification despite challenges related to cost, methodology, and scope of abuse.

No new precedent was established beyond affirming existing authority and the CAT’s role as gatekeeper. The decision reinforces the practical and purposive approach to collective proceedings, emphasizing the importance of access to justice for large classes of consumers and the feasibility of aggregate claims in competition law.