A New Consumer Class Action Regime For The UK?

The Proposed System

This Autumn, the Law Commission intends to consider whether the UK should introduce a new class action regime designed to make it easier for groups of consumers to bring claims relating to unlawful business practices.

The proposals could represent a significant change in the way large-scale consumer claims are handled, particularly where a large number of people have been affected by the same or similar conduct.

How Do Group Claims Currently Work in the UK?

There are already several ways for groups of people to bring claims together under the Civil Procedure Rules.

These include Group Litigation Orders (GLOs), which allow claims involving common or related issues to be managed collectively by the courts; representative actions, where one person brings a claim on behalf of a wider group with the same interest; and omnibus claim forms, which allow multiple claimants to be included within the same proceedings.

However, an ‘opt-out’ class action works differently. Under this type of system, people who fall within a defined group can automatically be included in a claim unless they specifically choose to opt out.

In the UK, this approach has, to date, generally been limited to certain competition law claims brought before the Competition Appeal Tribunal (CAT).

The Challenges With the Current System

Existing mechanisms such as GLOs and omnibus claim forms can offer considerable advantages. They can allow claimants to pool resources while helping the courts manage large numbers of related claims more efficiently.

However, these cases can also become complicated to administer. Practical challenges can include maintaining an accurate register of people involved in the claim, coordinating multiple law firms and ensuring that potentially large numbers of claimants remain informed throughout the proceedings.

Representative actions have also faced procedural difficulties, particularly because of the requirement for members of the group to satisfy the ‘same interest’ test. In broad terms, this means those being represented must share sufficiently similar interests in the outcome of the claim.

Could an Opt-Out System Improve Access to Justice?

A review of the opt-out mechanism could offer an opportunity to address some of these difficulties.
If introduced more widely, an opt-out regime could potentially reduce some of the legal and administrative costs associated with large group claims and make it easier for consumers to seek redress.

This could be particularly important where the financial loss suffered by each individual is relatively small, making it difficult or uneconomical for someone to bring a claim alone, but where the same issue has affected a very large number of people.

A notable example from the competition law context is Merricks v Mastercard, a major collective action concerning purchases made by UK consumers over a period between 1992 and 2008. Cases of this scale demonstrate the potential importance of collective proceedings where alleged harm is spread across millions of consumers.

The Potential Risks of an Opt-Out Regime

Expanding the opt-out system would not, however, be without challenges.

Cases before the Competition Appeal Tribunal have demonstrated that even where collective proceedings reach a successful outcome, this does not necessarily mean that compensation reaches a significant proportion of the people represented.

In the Boundary Fares collective proceedings, for example, a £25 million settlement involving South Western Trains resulted in a comparatively low level of claims from eligible class members, with only a little over £200,000 ultimately being claimed by the wider group.

This highlights an important issue for any future consumer class action regime. If consumers are automatically included in proceedings, there must also be effective ways of making them aware of the claim and helping them understand whether they may be entitled to compensation.

Greater emphasis on communication, outreach and engagement could therefore be essential to ensuring that an opt-out system delivers meaningful redress to the people it is intended to benefit.

What Happens Next?

The Law Commission’s consideration of consumer class actions comes at a time when other areas connected with large-scale litigation are also under scrutiny.

The consultation may need to be considered alongside Parliament’s anticipated legislation concerning litigation funding – the arrangements through which third parties can provide financial backing for legal claims – as well as increased scrutiny from the Solicitors Regulation Authority (SRA) of firms handling high-volume consumer claims.

Taken together, these developments could provide an opportunity to consider how collective claims can be made more accessible and efficient while ensuring that appropriate protections remain in place for consumers.

What Could the Changes Mean for Consumers?

Any move towards a wider opt-out class action regime would represent a significant development in UK consumer litigation.

For people affected by widespread unlawful practices, particularly where bringing an individual claim would not otherwise be financially practical, a well-designed collective action system could provide a more realistic route to obtaining redress.

The detail of any proposed reforms will be crucial. Bond Turner will continue to monitor developments in this area and what they could mean for consumers and organisations involved in large-scale and group litigation.