‘New litigation industry’ will deter investors, CBI warns
Government proposals for ‘opt-out’ class actions for consumers could spark a new ‘litigation industry’ around competition law and deter inward investment and growth, business lobby group the Confederation of British Industry warned today.
Businesses need incentives such as reduced fines to participate in alternative dispute resolution (ADR), which the CBI said is a ‘quicker and cheaper’ means of providing collective redress.
Responding to a Department for Business, Innovation and Skills consultation on private actions in competition law, the CBI warned that by grouping potential claimants together without naming individuals, opt-out class actions will ‘magnify the total amount of potential claims and fuel a culture of litigation’.
The CBI agrees that businesses which have caused significant loss to consumers should be required to provide compensation. Government recognises that collective redress can be delivered through ADR, it added, yet believes this will only work if companies are faced with the ‘big-stick’ sanction of opt-out class actions.
Matthew Fell, CBI director for competitive markets, said: ‘At a time when the unrelenting focus must be growth, the government should set out a strong message that the UK is open for business, not open for litigation.
‘The government is in danger of importing a number of features of the US class-action system into the UK, including opt-out arrangements, awarding of aggregate damages and a distribution of surplus funds.
‘Victims of competition law breaches must receive proper compensation, but this should be delivered in a cost-effective way, with litigation a last resort. The best way to achieve this is through ADR methods, which are increasingly being used by business, and often result in a better outcome for both parties.’
The CBI advocates a new mechanism by which a court could approve a collective settlement entered into by a company. See the CBI’s response.