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The landscape
Italy has traditionally offered limited scope for collective actions to protect consumers.
Initial recourse under the Italian Consumer Code was followed in 2019 with separate amendments to the Civil Procedure Code, allowing for publicly registered organisations and associations to bring class actions to protect the rights of comparable groups of inpiduals.
This so-called Class Action Reform widened the scope of class actions beyond consumers. However, adoption of the system was low due to complex rules, high costs incurred by claimants and inadequate incentives for law firms to take on group claims.
More recently, Italy's framework for class actions has expanded significantly with the adoption of Legislative Decree 28/2023. This amends the Italian Consumer Code to implement the European Union (EU) Directive on representative actions. Already, it is clear that this development represents a substantial step forward for the rights of plaintiffs, while presenting new dynamics and risks for consumer-facing companies.
Businesses in Italy are in the early stages of reforming their systems and processes to better manage class action risk. With cybersecurity and data breaches likely to inform many group actions in the future, there is an increased focus on compliance with data protection regulations, as well as preventive measures such as monitoring network traffic and conducting regular employee training. It is important to assess how the company could cope with a sudden interruption of production.
Pietro Pouché
Partner
Current developments
The biggest question is whether creating a separate new system within the Italian Consumer Code, instead of amending pre-existing class actions law, will deliver more than regulatory complexity.
Unlike the existing class action mechanism, which aims to protect the "homogenous inpidual rights" of class members, the new representative action aims to protect the collective interests of consumers. In practice, this opens up membership of a class action to a larger number of potentially aggrieved parties. Associations of consumers listed on an official database will also have the right to pursue collective redress. This will be the case, irrespective of whether a specific mandate exists from all inpiduals with a relevant interest.
Italy's new law has broad scope. It covers protections for collective damage stemming from defective products and unfair contract terms, as well as data breaches, climate change and other environmental issues. It is envisaged that pharmaceutical and financial services companies will face a sharp increase in class action claims.
Future trends
Only a few cases have been brought so far in the wake of the introduction of the EU Directive.
As a result, the new laws have been subject to limited judicial interpretation and consumer attention.
Nevertheless, the broader scope of Italy's class actions framework means that businesses have to be more concerned about litigation than ever before.
Companies are likely to be increasingly cognisant of the impacts of class action litigation on corporate value and share price. There are also potential negative reputational impacts stemming from the publication of an appeal [for prospective plaintiffs to join the case]. This is even before a judge has ruled on the admissibility of the action. At the same time, there is no equivalent provision for defendants' arguments to be made public.
Another trend is likely to be an increase in cross-border class claims. This is because the new laws offer give consumer associations the opportunity to partner internationally.
There will likely be an increase in cross-border class claims with new laws offering consumer associations the opportunity to partner internationally.
Top 5 areas for class actions in Italy
- Financial risks
- Market risks
- Cyber
- Consumer
- Environment
Next steps for business
Understand the cyber risk: With cybersecurity and data breaches likely to inform many group actions in the future, there is an increased focus on compliance with data protection regulations, as well as preventive measures such as monitoring network traffic and conducting regular employee training. It is important to assess how the company could cope with a sudden interruption of production.
Knowledge and communication: Having complete knowledge and efficient communication within the organisation is critical to being able to react promptly and mitigate class action risks. For example, local business units should be able to quickly obtain information on customers and ongoing operations. They should have a complete overview of contractual and commercial relationships and be able to communicate efficiently when litigation is at hand.
Prepare for cross-border claims: Given the increasing likelihood of cross-border class actions, Italian companies should evaluate the laws of potential jurisdictions where they might face legal action due to so-called forum shopping by claimants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
