Breaking the internet? The rise of competition class actions in the Tech sector
Competition class actions were once an almost uniquely US phenomenon. Not anymore. As new “opt-out” class action regimes have evolved in the UK and Europe, a flurry of claims has been launched, many of them against tech businesses. While some claims piggy-back on existing investigations by competition authorities, others pursue tech firms not otherwise under investigation or based on novel theories of harm not advanced by a regulator. The claimants seek eye-watering sums in damages, which would in many cases dwarf fines by competition authorities. And claimants are increasingly emboldened to pursue class actions in multiple jurisdictions in parallel.
Class actions against Big Tech – spotlight on the UK
Historically in the UK, competition litigation typically “followed-on” from infringement findings of the Competition and Markets Authority (CMA) or the European Commission. But we are now seeing private litigants, emboldened by enforcement against Big Tech and empowered by a reboot of the UK’s regime, bringing stand-alone claims.
The Supreme Court’s judgment in Merricks v Mastercard in December 2020 provided a launchpad for opt-out class actions, i.e., where affected individuals and businesses are included unless they explicitly “opt out”. For large tech firms with tens of millions of users in the UK, this means that the potential sum of damages can be huge, even where the alleged “loss” suffered by each user is small, making claims attractive for litigation funders (e.g. in the Gormsen v Meta claim, the over £2 billion aggregate damages claimed amounts to around £50 per Facebook user).
Since May 2021, each of Apple, Google, Meta and Amazon has been the target of at least one class action. Some claims concern conduct that is under parallel investigation by regulators. Class actions against Google and Apple, for example, focus on conduct under investigation by the CMA and European Commission regarding access to, and use of, the Play Store and App Store respectively. But a case has also been launched against Sony in the different context of its PlayStation Store, in relation to which there is no authority investigation.
Claimants are also increasingly deploying theories of harm not traditionally considered through by competition law. The case against Meta alleges it abused its dominant position by taking excessive data from users without appropriate compensation, whilst a second class action against Apple alleges it abused its dominant position by “throttling” older handsets to circumvent battery performance issues. These alleged practices might once have been dealt with under data protection and consumer protection legislation. Instead, the high damages potentially recoverable through an opt-out claim provide strong incentives to litigation funders and claimant law firms to re-cast claims as competition infringements.
Fighting on multiple fronts
The trend is not limited to the UK. Google’s Play Store and Apple’s App Store are also the subjects of class actions in the Netherlands and Portugal. With the EU’s Collective Redress Directive possibly leading to further opt-out class action regimes, tech companies need to prepare for parallel fights with regulators and potential claimants, and for “copycat” class actions across EU jurisdictions.
The EU’s Digital Markets Act will also have a significant impact on the private enforcement landscape. The obligations in the DMA give potential new grounds for litigation against “gatekeepers”. But the effect on litigation outside the EU could be mixed: read-across of adverse findings under the DMA to non-EU jurisdictions will be more challenging for claimants seeking to pursue equivalent actions in multiple jurisdictions than in cases where the European Commission has relied upon traditional competition tools.
In the US, meanwhile, class actions against tech firms show no sign of abating. Claimant firms continue to pursue litigation in parallel with government enforcement. Dominance cases on behalf of classes of consumers, developers, and advertisers have been brought against Google (advertising / Play Store), Apple (App Store / Apple Pay), Amazon (e-books), amongst others.
Faced with an ever-growing suite of claims, tech companies are fighting fire with fire. In a recent move to dismiss US antitrust claims in relation to advertising, Google sought to dismiss one claim it said “borrows liberally from a grab-bag of allegations” in other competition claims and others which it claimed had been dismissed previously.
Looking ahead – future claims
Owing to significant market shares and sizeable customer bases, tech’s biggest players should expect competition claims in multiple jurisdictions to keep trending for some time. We expect claimant firms and funders to continue to be attracted by potentially lucrative claims in which the quantum of damages sought can extend well into the billions.
Faced with these continuing threats, tech firms will need to carefully consider business practices to reduce exposure and, where litigation is afoot, adopt strategies to minimise the otherwise inevitable costs, reputational harm and business disruption.
