Competition litigation: 'user damages' for the unlawful collection and use of data?

The cause of action in competition cases in the UK is usually the tort of breach of statutory duty. As a general rule, the damages to be awarded for loss caused by tort are compensatory. The claimant is entitled to be placed in the position it would have been in if the tort had not been committed. This principle has been around for a long time; it is often illustrated in judgments today through citations of a case from 1880 (Livingstone v Rawyards). 

Using the compensatory principle, damages are typically quantified by using a counterfactual in which the infringement was not committed. For example, if a competition law infringement led to the claimant being charged higher prices, 'but for' the defendant's unlawful action, the claimant would have been charged a lower price. At the risk of over-simplification, the claimant's loss can therefore be quantified as the difference between the higher price actually charged and the lower price that should have been charged.

The Gormsen v Meta case, currently before the Competition Appeal Tribunal, offers an intriguing example of how this approach to damages can play out in collective proceedings. 

The class representative alleges that Meta has abused a dominant position by making access to Facebook conditional upon users giving up access to personal data concerning their off-Facebook activities. This is said to be either an unfair trading condition or an unfair price, and in either case, an infringement of competition law. 

Damages are claimed upon the basis of a counterfactual whereby Meta would have paid users for their off-Facebook data. In other words, but for the alleged abusive conduct, users would have received a payment from Meta for their data. Therefore, the loss allegedly suffered by users is the difference the payments they received in the factual world (nothing) and the amount of the payment the class representative says should have been made in the counterfactual world. 

Damages in collective actions already go further than the traditional application of the compensatory principle because they tend to assess damages at the aggregate level, rather than on an individual basis. This has been endorsed by the UK Supreme Court, which noted in Merricks that a "central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual assessment of loss."

However, in this case, Meta's position is that it would never have paid users for the data in question. It maintains that it would have found another way to organise its affairs such that it would be not abusing a dominant position, without needing to make payments for the data. If Meta were to prove this at trial, it would mean that the class had suffered no loss under the conventional compensatory principle. Users would have received no payment in the factual world and no payment in the counterfactual world. 

The class representative therefore sought permission to amend its claim to introduce an alternative basis for seeking damages based on the interference of the right of users to control the collection and use of their off-Facebook data. 

This type of claim is known as 'user damages'. The UK Supreme Court has previously clarified in One Step that user damages are still compensatory. It noted that though the application of the compensatory principle is "less obvious" in situations where there has been no pecuniary loss or physical damage, where a trespasser has made valuable use of someone else’s land, without causing any diminution in its value, the landowner has been held to be entitled to damages measured as what a reasonable person would have paid for the right of use.

In this case, the class representative claims that users are due compensation for the interference with their rights, to be quantified by assessing a hypothetical negotiation between Facebook and users, as a reasonable and willing buyer and sellers respectively, for permission to collect and use the data.

Meta sought to challenge this, arguing primarily that user damages are not available in competition law cases. However, the class representative's amendments only had to satisfy the test for strike out / summary judgment, i.e. they needed to show a realistic prospect of succeeding at trial.

The Tribunal held that there was no principle that user damages are not available in competition law cases. Whether they should be available in this case was "far from straightforward", but the case had reasonable prospects of succeeding at trial. The Tribunal also noted that this is a developing area of law and therefore not amenable to summary determination. 

Of course, while the Tribunal has endorsed the principle that user damages are available in competition law cases, whether this will translate at trial into the first such damages award remains to be seen.