Opt-in collective actions in competition cases move closer

European Commission: third-party funding conditions

The government yesterday pressed ahead with plans to allow consumers and businesses to bring opt-out collective actions for breaches of competition law – but indicated that they are not yet a done deal.

The new provisions were included in the draft Consumer Rights Bill published by the Department for Business, Innovation and Skills (BIS) yesterday, following its policy announcement in January.

Any representative group or trade association could take forward an action, and eligible consumers or businesses would automatically be included unless they opted out.

Among the safeguards BIS said will avoid the introduction of US-style class actions, lawyers will not be able to handle collective actions under damages-based agreements, and law firms and third-party litigation funders will not be allowed to initiate the actions.

There will also be strict judicial certification of cases and no treble or exemplary damages, while the ‘loser pays’ rule will stay.

Nonetheless, BIS still said yesterday: “We are aware of strong and different views of stakeholders about the effectiveness and impact of these proposals. We therefore particularly welcome comments and views on this element of the bill’s proposals to help inform a final position and ensure the outcome is as effective as possible.

The CBI has been one of the most vocal critics of collective actions, and Matthew Fell, its director for competitive markets, said: “We will resist any efforts to introduce US-style class actions into consumer redress, which risks fuelling a litigation culture and making the UK a worse place to do business.”

Publication of the bill came the day after the European Commission put forward its proposals for collective redress mechanisms across the EU, which said they should, as a general rule, be based on the opt-in principle. “Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice,” the commission said.

The commission also opposed the use of contingency fees – which it said risked “creating an incentive for abuses” – but while it has not ruled out third-party funding, it proposed conditions, in particular related to transparency, to ensure there is no conflict of interests.

These would include stopping funders from seeking to influence the claimant’s decisions, including on settlements, from financing an action against a defendant who is a competitor of the funder or against a defendant on whom the fund provider is dependent, and from charging excessive interest on the funds provided.

The court would be able to stay proceedings in the event the third party has insufficient resources in order to meet its financial commitments.

EU states now have two years to implement their collective action regimes.