Foreign exchange manipulation could provide a test case for a new right to pursue US-style 'opt-out' class actions on behalf of consumers, a leading firm has predicted.
Schedule 8 of the Consumers Rights Act 2015 which comes into force today will for the first time provide a procedure for class actions. This allows a single representative to bring a claim on behalf of an entire category of claimants, except any who opt out.
London firm Collyer Bristow said that such actions are appropriate for infringement of competition law as damages from anti-competitive conduct are often spread among many consumers. Victims of foreign exchange manipulation could be early beneficiaries, the firm said.
The changes to the Consumer Rights Act impact on the Competition Appeal Tribunal, which until now could hear claims only following infringement decisions by competition regulators. From today, tribunals will be able to hear stand-alone claims.
The new rules include a procedure for collective settlements and also empower the tribunal to grant injunctions to stop anticompetitive behaviour.
However Stephen Critchley of Collyer Bristow’s banking and financial disputes team said that there was no certainty class actions against anticompetitive behaviour would take off. 'It is difficult to predict how popular opt-out actions will be, not least because of the risk in bringing them,' he said.
'They will usually be underwritten by third-party funders in exchange for a share of any damages and/or lawyers acting on a contingent basis. A large volume of work must be done before the Competition Appeal Tribunal decides whether to certify the class, which may all be wasted if certification is not granted.
'However, it is expected that, sooner or later, there will be a claim large enough to justify testing the water, in which regard foreign exchange rate manipulation is an early candidate.'
The Confederation of British Industry described the new regime as a step in the wrong direction. Matthew Fell, competitive markets director, said: ‘The genie is now out of the bottle for US-style class actions in the UK. The government is right to be embarking on a deregulatory drive to boost the economy, but introducing an opt-out scheme for competition cases by default feels like a step in the wrong direction.’
He said that the UK already has some of the world’s highest liability costs as a percentage of GDP. ‘The opt-out scheme runs the risk of worsening this problem, creating lucrative opportunities for those seeking to promote mass litigation and driving moves to a class action culture.’
The Consumer Rights Act also entitles anyone who buys faulty goods to a full refund for up to 30 days after the purchase.