UK Competition Litigation Quarterly Update: Q2 2025

Mrs Justice Kelyn Bacon DBE assumed the role of President of the CAT on 23 May 2025.  Drawing on her extensive experience, Mrs Justice Bacon is expected to steer the CAT towards a procedurally robust style of judicial oversight, marking a return to a more traditional case management style for complex competition disputes following a period of more experimental case management.

Mrs Justice Kelyn Bacon DBE officially assumed the role of President of the CAT on 23 May 2025. This appointment, announced by the Lord Chancellor, marks a pivotal moment for the CAT. She succeeds Mr Justice Roth, who served as Acting President.

Mrs Justice Bacon was called to the Bar in 1998, was made a KC in 2014 before being appointed as a High Court Judge and Chair of the CAT in 2020, following three years as a Deputy High Court Judge. She regularly appeared before the CAT during her career as a practicing barrister – one of her last instructions was acting for a defendant in the Trucks litigation. Her extensive background and renowned experience in complex competition disputes position her well to lead  the CAT at a time when it is navigating significant challenges, primarily driven by a surging caseload and the increasing complexity of collective actions.

Mr Justice Roth took on the role of Acting President after Mr Justice Marcus Smith stepped down from his role in November 2024. During his presidency, Mr Justice Marcus Smith introduced novel case management procedures in a bid to deal efficiently and effectively with cases such as Interchange and Trucks, where single infringements give rise to numerous claims. Procedural innovations included expert-led disclosure, case management meetings, and orders that parties be bound by rulings in similar cases. While attempts to streamline complex cases and explore new efficiencies were welcomed, at times the innovations presented challenges for claimants and defendants alike, both in terms of practical difficulties and unpredictability in case progression.

Although it is early days for Mrs Justice Bacon’s presidency, it is anticipated that Mrs Justice Bacon will prioritise ensuring that claims proceed efficiently to trial, with a greater emphasis on established procedural norms and less experimentation.

One matter in Mrs Justice Bacon’s in-tray is a review of the CAT’s procedural rules. The previous UK Government decided to undertake a technical review of the rules in 2022 and, although some discussions took place with stakeholders, no proposed changes to the rules materialised such that this will be the first time there will have been a comprehensive evaluation of how the rules are working since Sir John Mummery’s 2014 review.

You can read about the robust approach taken by Mrs Justice Bacon in refusing certification in Riefa in our Q1 Quarterly Update here.

Judgment has been handed down in the Merricks interchange fees collective action approving Mr Merricks’ joint application with Mastercard for a collective settlement. The settlement was exceptional given the relative failure of the claim and the acrimonious parting of ways between Mr Merricks and his funder, Innsworth Capital.  Attention now turns to a judicial review launched by Innsworth in the High Court challenging the CAT’s decision on distribution.

The CAT handed down its judgment on 20 May 2025, setting out its reasoning for the approval of the Merricks class action settlement on 21 February 2025 (see our previous report on the February approval here). Although this was the fourth time the CAT has determined a collective settlement, the exceptional circumstances of the case meant it was grappling with novel and difficult issues.

One factor that loomed large was the relative failure of the claim – the parties settled for about 1% of the original headline claim value. Although the CAT was satisfied that the £200 million settlement was just and reasonable given the chequered history of the case – including adverse judgments for Mr Merricks on limitation and causation – it scrutinised the evidence on the merits of the claim were it to continue. It placed reliance on an opinion from Mr Merrick’s leading counsel advising him that he was likely to lose a trial on counterfactual causation that represented about 95% of the value of transactions underpinning the claim.

Another exceptional factor was the bitter row between Mr Merricks and his funder, Innsworth Capital, over Mr Merrick’s agreement to the settlement against the funder’s wishes, which escalated when Innsworth commenced arbitration proceedings against Mr Merricks. The CAT held that this “falling out” actually militated in favour of approving the settlement because it was hard to imagine the case continuing with Innsworth and Mr Merricks still in their roles. This underscores how funders dissatisfied with a settlement proposal need to consider carefully their conduct when conveying concerns to the class representative.

The CAT was clear that these factors had driven its determination to approve the settlement and the outcome on distribution, and it therefore warned against its judgment being used as a “guide for more positive settlements”.

One interesting observation made by the CAT was that the simplest way to reflect the outcome of the case in the funder’s return would be for it to receive a percentage of the damages recovered, yet this course was precluded by the Supreme Court’s judgment in PACCAR (which held that funding agreements involving percentage based returns can be considered damages based agreements) together with the prohibition of damages-based agreements in opt-out collective proceedings.

The CAT referred to evidence from a case in Australia (which has a mature class actions regime) that a substantial litigation funder operating on a portfolio basis (as all funders do) obtained a return on investment (ROI) of 120% on all completed cases and 190% on those which did not produce a negative return. In the absence of evidence of Innsworth’s own ROI, the CAT considered this to support an ROI at a level of 150% in the circumstances of the case, including the poor outcome.

Since the judgment was handed down, Innsworth has launched a judicial review of the CAT’s determination on the distribution mechanism.  It is understood that one focus of its challenge is the CAT’s determination that unclaimed funds in one of the pots could go to charity (the Access to Justice Foundation), rather than being available to increase Innsworth’s return. This ongoing dispute is playing out at a sensitive time for litigation funding, with the Civil Justice Council having recently published its report into litigation funding (read our separate update at Chapter 3) and as the UK Government contemplates whether, and to what extent, it is necessary to regulate the litigation funding market.

Watch this space for further updates as Innsworth’s judicial review proceedings progress in the High Court.

(Case 1266/7/7/16 – Walter Hugh Merricks CBE v Mastercard Incorporated & others)

The Final Report of the Civil Justice Council (CJC) on the reform of litigation funding has been making waves. The headline recommendation is the reversal of the effect of the Supreme Court’s judgment in PACCAR. However, the CJC also recommends sweeping reforms, including statutory regulation for funded claims, which, if implemented, would have a significant impact on the litigation funding landscape in the UK.

Following a public consultation, the Civil Justice Council (CJC) reported to the UK Government on 2 June 2025 with recommendations for the reform of litigation funding.

Its proposal for the reversal of the effect of the Supreme Court’s judgment in PACCAR as a priority is significant, particularly since it would lift the bar on damages-based agreements in opt-out collective proceedings before the CAT. However, that is but one of 58 recommendations in the report. The other recommendations include:

• Statutory regulation of litigation funding, with enhanced regulation in certain cases.
• Regulation of portfolio funding, litigation loans, crowdfunding, and pure funding (funding provided for an altruistic purpose where the funder does not control the litigation, does not have an interest in the outcome, and does not fund it in the course of their business or through crowdfunding).
• Reform of Damages Based Agreements and Conditional Fee Agreements.

The CJC has recommended “light-touch regulation” to replace the voluntary Code of Conduct for Litigation Funders (the Code) administered by the Association of Litigation Funders. This would include a set of standard requirements that would apply in all funded cases, with enhanced requirements for cases where litigation funding is provided to consumers and parties engaged in collective proceedings, representative actions and group litigation.

Much of what the CJC recommends represents the codification of the Code requirements and judicial procedures that have become well established features of the certification process as the collective proceedings regime has developed in the CAT.

However, the CJC’s recommendation for the funder and funded party’s lawyer to have to certify to the CAT that they did not approach the funded party to seek their agreement to pursue proceedings would be a marked change. It is in practice commonplace for competition damages actions to be originated by litigation funders and law firms and there have been several certified collective proceedings in the CAT where the genesis of the case is that the funder and/or law firm approached the prospective class representative with a proposal to pursue proceedings.  The implication of the proposed reform is that the origination of claims in this way would become impermissible, shifting the impetus for launching claims onto class representatives. We might therefore see more collective actions being started by individuals who have already acted as the class representative for other claims, since they will be familiar with the process (there are a couple of examples of this already). However, it would likely lead to a significant reduction in damages claims, and in particular collective proceedings, being pursued.

Another fundamental change proposed by the CJC is that the CAT should assess whether the funding terms under a proposed litigation funding agreement (LFA), and in particular, the funder’s return, are “fair, just and reasonable” as part of its consideration as to whether to grant certification to collective proceedings. Whilst the CAT currently does consider the funding terms when determining whether to certify proposed collective proceedings, its practice is not to assess the reasonableness of a funder’s return at that stage (save for assuring itself that the funder’s return is not so extreme as to warrant calling out or refusing certification). The CAT has deferred this question to the time of distribution, taking the view that it is more appropriately addressed then, once there is a proposed settlement sum or judgment award to work from.

The Government is now considering the CJC’s recommendations. The consultation responses demonstrate the strength and range of opinion among stakeholders, ranging from funders and claimant law firms pushing to maintain self-regulation, to business lobbies seeking stringent regulation of litigation funding. It remains to be seen whether, and to what extent, the Government agrees with the judgement calls made by the CJC in striking the right balance between facilitating access to justice and providing appropriate and effective protection for funded parties and for defendants in facing high value claims with questionable merits.

The CJC’s Final Report can be accessed here.

A start-up toy company that succeeded in proving the defendant’s abuse of dominance has had its damages claim against a competitor dismissed after the High Court held that it had failed to show that its business would have been profitable but for the abuse. The judgment, which features analysis of vertical restraints and disparagement, provides an insight into the approach of Mrs Justice Bacon, the new president of the CAT, to trying the complex claim. The issue of expert independence raised its head yet again, with the Judge criticising both parties for a lack of objectivity.

On 16 June 2025, Mrs Justice Bacon handed down a judgment dismissing a competition damages claim for lost profits brought by start-up Cabo Concepts Ltd against a competitor, MGA Entertainment, following a six-week trial in the High Court.

Cabo alleged that MGA had entered into anti-competitive agreements with toy retailers and had abused its dominant position through actions taken in response to Cabo launching a new toy brand called ‘Worldeez’, a line of surprise collectible figures, which MGA asserted was a ‘knock off’ of its popular ‘LOL Surprise’ toy.

Mrs Justice Bacon held that the agreements between MGA and the toy retailers that the latter would delist Worldeez were, in principle, restrictive of competition by object. However, she concluded that the agreements were vertical agreements which were exempt under the EU Vertical Agreements Block Exemption and were therefore not prohibited.

The Judge did however find that certain actions taken by MGA, including threatening to withdraw supplies of its ‘LOL Surprise’ toy to existing customers and making claims that Cabo’s ‘Worldeez’ toy infringed its intellectual property, amounted to an abuse of MGA’s dominant position. The judgment is a rare example of a UK court considering abusive disparagement (essentially a dominant company denigrating a competitor’s products or services), a relatively novel form of abuse. However, Bacon J concluded that the claims MGA made concerning Worldeez were an aspect of an overall exclusionary strategy, rather than finding that the disparagement constituted a freestanding abuse.

The reason the claim ultimately failed is the Court determined that, even without MGA’s conduct, Cabo would not have achieved the domestic sales volumes it needed to break even, and there was no evidence that its investors would continue to invest in an unprofitable venture.  The Judge reached this conclusion relying mainly on witness evidence, evidence from experts in the toys market, and analysis of contemporaneous documents. She also noted that her assessment of the expert economists’ quantum models supported the conclusion she had reached about Cabo being unprofitable.

The judgment will be carefully studied by practitioners keen to understand how Mrs Justice Bacon, the new President of the CAT, managed the trial. One notable feature is the Judge’s assessment of the expert evidence. In what is becoming a pattern in the trial judgments of competition damages actions, both parties’ experts faced criticism. They were “about as far apart as could be imagined” on the key issues in dispute, the Judge noted. Cabo’s economist had only modelled a scenario where Cabo enjoyed significant success. Conversely, MGA’s economist placed undue reliance on a model envisaging Cabo would have modest success. The Judge found that their “unrealistic” approaches lacked an adequate grounding in the facts and indicated a lack of objectivity in both cases.

There are (at least) two salutary lessons here. First, experts should be careful not to construct overly theoretical models detached from the factual evidence.  Second, experts should not limit their assessment in such a way that excludes realistic scenarios. In either case, where the expert’s modelling decisions consistently and exclusively align with their client’s interests, experts should not be surprised if the Court calls out their conduct, as was the case here.

(Case HP-2020-000016 - Cabo Concepts Limited & another v MGA Entertainment (UK) Limited & another)