The government is exploring a new opt-out class action regime for consumer law claims in England and Wales. This would be a major shift in the litigation landscape, as the first 'true' class action for claims of this type. It has kicked off a Law Commission review to assess whether enforcement of consumer law could be strengthened through the introduction of an opt-out class action system. The review will set out the risks & benefits and make recommendations around the design of any regime. The government has familiar goals in mind: improving consumer access to redress and promoting the efficient conduct of litigation at proportionate cost.
A consultation on the introduction of an opt-out class action regime for consumer claims in England & Wales has been in the ether for a while. Historically, going back over the last two or three decades, successive governments have always pushed back on the introduction of a widely applicable ‘true’ class action regime – including as recently as 2022. This was largely for fear of encouraging excessive litigation, which was seen as a major fault with the US system, choosing instead to stick with other mechanisms, such as the opt-in group action.
But over the years the calls for an opt-out procedure have been increasing. A generic class action was always rejected in favour of a sectoral approach, leading to the introduction of the CAT class action regime for competition claims. Since then, pressure has continued to mount including through collective action reforms in other jurisdictions, such as the EU, plus a surge of class actions in the CAT, many of which have an underlying consumer law angle. So it’s not surprising the government has asked the Law Commission to look at this again.
As well as the pros and cons of an opt-out system, and all the usual structural questions around defining the class and the process for starting and managing proceedings, the Law Commission is also looking at what should be considered a 'consumer law claim' for any class action regime that may be introduced. This is obviously a very important question and one business should be focussed on. There is no definitive list of what constitutes a 'consumer law' and it could catch a very wide range of obligations, encompassing anything that governs a business’s interaction with consumers. This would include core B2C legislation applying to consumer contracts and prohibiting unfair commercial practices, such as the Consumer Rights Act and Digital Markets Competition and Consumers Act (DMCC), but could also cover other areas like consumer credit and privacy, as well as sector specific legislation including financial services, utilities, telecoms…and so on. It could theoretically encompass product liability claims under the Consumer Protection Act, as the Australian system generally does. Even if a narrow definition of consumer law is ultimately recommended, many sectors and businesses would be facing increased litigation risk.
It’s also important to note that this review isn’t happening in isolation. It sits alongside, and will consider the conclusions from, the government's parallel review of the existing class action regime for competition claims. The Department for Business and Trade recently said that the call for evidence had identified common themes, where changes to the regime may make it operate more effectively and deliver better for consumers. A consultation on these changes is expected in the coming months. This will no doubt provide the Law Commission with a helpful perspective.
The Law Commission will also consider the funding of consumer class actions, taking into account any reforms flowing from the Civil Justice Council’s recent review. We are still awaiting details of the government’s plan for 'proportionate regulation' of litigation funding, where an intention to legislate has been announced but no details yet released.
The DMCC also provides the Competition and Markets Authority (CMA) with new enforcement powers including a direct enforcement regime, under which the CMA can sanction companies for breaches of consumer law. These are powers the CMA has started to use and the Law Commission will need to give careful consideration as to how any opt-out class action regime should work alongside public action.
As a first step, the Law Commission has requested responses to an initial scoping questionnaire by 30 October. The review should be monitored closely and consideration given to responding to the scoping questionnaire or the consultation that will follow, either directly or through an industry association. Whatever the ultimate outcome of review, it’s clear that there will be continued evolution of the consumer disputes landscape in the coming years.
Matthew Felwick is a partner and collective actions specialist at Hogan Lovells
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