29 January 2013Print This Post

Government to allow opt-out collective actions – but not on contingency fees

Lloyd: plan puts consumers in the driving seat

The government is to introduce opt-out collective actions for competition law claims, but lawyers will not be able to handle them on a contingency fee basis, it announced today.

Law firms and third-party litigation funders will also not be allowed to initiate such cases.

There will be a raft of other safeguards to avoid the accusation that it is allowing US-style class actions, including strict judicial certification of cases, no treble or exemplary damages and maintaining the ‘loser pays’ rule. However, the CBI has still made exactly that claim.

Other changes announced by the Department for Business, Innovation and Skills (BIS) following last year’s consultation on private actions in competition law include making the Competition Appeal Tribunal the main court for competition actions in the UK, including a fast track regime, and promoting alternative dispute resolution.

The government said “there could be a risk of abuse if legal firms, funders or special purpose vehicles established solely for the purpose of litigation were allowed to bring cases”, with conflicts of interest a particular concern of respondents to the consultation.

Instead, only those who have a “genuine interest” in the case, such as genuinely representative bodies (such as trade associations or consumer associations) or those who have themselves suffered loss should be allowed to start litigation.

Groups of consumers or businesses will automatically be included in the action unless they opt out (although non-UK domiciled claimants will have to opt in). It will also allow for a collective settlement to reduce costs for the offending party.

Any unclaimed damages will be allocated to the Access to Justice Foundation, in line with the recommendations in the Jackson report and the Civil Justice Council.

BIS quoted consumer group Which? saying that in systemic cases of mis-selling, a collective action can offer a better resolution.

Competition minister Jo Swinson said: “Competition is one of the great drivers of growth; it keeps our prices low and our businesses innovating. This is why it’s important that where there are businesses who abuse their position in the market, those who have been affected can take appropriate action.”

Which? executive director Richard Lloyd said: “This will give consumers more power against unscrupulous businesses. In the small number of cases where this will apply, collective legal action and settlements will automatically include everyone who has been affected so more people should get redress and sooner.

“The proposals will help to put consumers in the driving seat and will also act as a meaningful deterrent to dodgy or dishonest firms. This is good for consumers, responsible businesses and the wider economy.”

However, the CBI immediately criticised the proposals. Katja Hall, its chief policy director, said: “The government has let the litigation genie out of the bottle by adopting US-style collective actions. By grouping potential claimants together indiscriminately, these ‘opt-out’ actions fail the growth test and will fuel a litigation culture in the UK.

“It is absolutely right that victims of competition law breaches are properly and swiftly compensated but there are better ways to do this than resorting to litigation, like using alternative dispute resolution.”

By Neil Rose

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