There was big news on collective actions last month, but it was not the announcement everyone was expecting. Claimant class action lawyers donned their hard hats, bracing themselves for blows to rain down from the Department for Business & Trade (DBT) as it published the conclusions of its review into the competition law collective actions regime. Yet the blows did not arrive, and (at the time of writing, at least) the DBT has yet to reveal the fate of that regime. Instead, the announcement was the last thing that the claimant sector expected – positive news. To everyone’s surprise, it emerged that the DBT has asked the Law Commission to examine the prospect of establishing a new opt-out class actions regime for consumer claims.
It has never really made sense for opt-out proceedings to be available where large numbers of people have been affected by a breach of competition law, but not where their losses stem from another area of law – such as environmental claims, product liability, or data breach. Meanwhile, moves are already afoot in Europe, through the Representative Actions Directive, to facilitate group actions for consumers. So the fact that the DBT is now considering a consumer class actions regime is perfectly logical, and in keeping with broader international trends.
What makes it so unexpected, however, is that it seems to be going against the spirit of the times in this jurisdiction – putting consumer interests above those of a business lobby that seemed to firmly have the ear of a government desperate for growth.
After all, the DBT had pointed to the ‘tens of billions of pounds’ paid out by businesses as an important driver behind its review of the competition collective actions regime, and yet now here it is, considering a whole new framework for people to bring mass claims against businesses. Is this a contradiction?
Actually, no. What the DBT has clearly realised is that a well-functioning consumer claims system is good for business – deterring certain companies from behaving badly and promoting fairer competition between the players.
So what might a new consumer class action regime look like? With the Law Commission only just having been officially handed the brief, it is far too early to say. However, it is already clear what the new mechanism will not be: a bonanza for claimant lawyers.
In announcing the project, the commission said it would identify the benefits and risks of consumer class actions, while having regard to other available mechanisms such as public enforcement action and alternative dispute resolution. It spelt out that the objectives of any new regime would include promoting ‘the efficient conduct of litigation at proportionate cost’, as well as ‘ensuring that damages are distributed to the affected class’, with the subtext being that consumer claims should not end up mainly benefiting lawyers and funders – a criticism often levelled at the competition class actions regime, rightly or wrongly.
The Law Commission poses just five questions in its initial scoping questionnaire. It is notable that after asking about the potential benefits and risks of a consumer class actions regime, the three remaining questions cover how to keep legal costs proportionate, how to ensure damages are distributed, and how to avoid speculative claims. It very much feels as though keeping the lawyers and funders in check will be a central plank of whatever proposal the commission comes up with.
Given the powerful deterrent effect of an effective mechanism for punishing poor business practice that harms consumers, the benefits of a new consumer class action regime, both for individual claimants and for consumers in general, could be very substantial indeed. The early signs are, however, that the benefit for claimant lawyers and funders will be rather more modest.
Rachel Rothwell is editor of Gazette sister magazine Litigation Funding and a former Gazette news editor
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