Latest developments for group legal claims in England & Wales could lead to stronger consumer protection and greater access to justice
As the legal systems in the UK come to terms with the impact of the digital age, there are potential changes to the way consumer group legal claims are run. Leigh Day’s Oliver Holland and Samantha Freeze examine whether so-called “opt-out” claims, where all those eligible are automatically included in a claim, could become the new normal, potentially increasing consumer protection and access to justice.
Posted on 31 January 2024
The landscape for collective actions in the UK is changing rapidly as the legal system attempts to adapt to an increasingly digitalised space. In contrast to many other jurisdictions (including the US, Australia, Canada and some European jurisdictions), the UK has been reluctant to advance the use of opt-out collective proceedings in group litigation.
Instead, collective actions are brought through opt-in proceedings whereby many thousands (and in some cases millions) of consumers wishing to join a claim have to actively join the proceedings in order to participate and benefit from them. This leads to significant legal costs at the early stage of proceedings and can be prohibitive to some legal actions going forward and lead to restrictions in access to justice. They also place significant pressure on the Court’s finite resources.
However, recent developments in case law and certain proposed amendments to legislation suggest a new direction. Here we explore the distinctions between opt-in and opt-out proceedings, the current class action landscape in the UK, and the recent development in legislation and case law that have the potential to increase consumer protection through enhanced collective action regimes. We at Leigh Day welcome these developments, believing that a more advanced class action landscape will undoubtedly increase consumer access to justice and encourage businesses to uphold their responsibilities to their customers.
The Current Regime
Opt-in regimes mean that proceedings must be issued for each individual claim, which are then collectively managed by the court under a Group Litigation Order; whereas Opt-out proceedings are brought on behalf of all who fit within the class definition and are therefore automatically part of proceedings unless they take active steps to remove themselves. For further explanation of opt-out and opt-in proceedings see here.
In order to protect their rights, consumers in the UK have historically been restricted to bringing private claims on an individual basis before the small claims court or have relied on the use of Group Litigation Orders, a case management tool that employs an opt-in procedure. This method is particularly costly as claimant firms must communicate with the different individual members of the group and encourage them to participate and issue a multitude of claim forms thereby incurring significant costs (for further explanation please see here).
More recently, changes brought in by the Consumer Rights Act 2015 (“CRA”), enabled the Competition Appeal Tribunal (“CAT”) to hear a broader range of private damages claims, having previously been restricted to hearing appeals of the UK’s Competition and Markets Authority (“CMA”). The new regime enables the UK’s first opt-out proceedings where a class representative brings a claim on behalf of a defined class of claimants. Proceedings in the CAT are limited to claims where there is an alleged competition infringement and resulting impact on a particular market.
Opt-out proceedings in the CAT have encompassed consumer related claims such as an ongoing claim against Sony which alleges that Sony abused their market dominant position and imposed unfair terms and conditions resulting in unfair prices. Last year, Leigh Day launched the first environmental claim in the CAT on behalf of millions of customers allegedly overcharged by water companies due to underreporting the number of times they cause pollution incidents. Nevertheless, in order to rely on the CAT, claimants must evidence the infringement of competition law and the impact on a particular market.
The option of representative actions
A further route for redress is a representative action, a case management tool that does allow for opt-out proceedings. Under this route, proceedings may be brought on an opt-out basis under CPR 19.8 (previously CPR 19.6) where claimants have the same interest in proceedings and can thereby be represented by a single representative to bring the claim on behalf of them all. Whilst this applies to any type of claim, the courts have historically interpreted the same interest requirement very strictly which has made representative actions uncommon.
The Supreme Court in Lloyd v Google rejected a data breach claim on behalf of 4 million UK resident iPhone users in relation to data tracking as the ‘same interest’ principle was interpreted strictly. The claim was not allowed to proceed as a representative action due to the requirement for individualised assessments of damages.
However, more recently, the decision in Commission Recovery Ltd v Marks & Clerk suggests the courts may approach the ‘same interest’ test more flexibly. The case considered the impact of referral fees on renewal services and the judgment emphasised a more relaxed interpretation of the same interest test, acknowledging that claimants need not have identical claims or interests, but there simply be no conflict to the class in the claim proceeding via a representative. The first instance decision was recently upheld by the Court of Appeal which may have significant implications for the collective action regime in this jurisdiction and lead to more claims through the representative action route.
Potential impact of the Digital Markets, Competition and Consumers Bill
Further developments to the class action landscape are found in proposed amendments to the draft Digital Markets, Competition and Consumers Bill (“the DMCC Bill”), which is currently in the committee stage in the House of Lords. The DMCC bill is intended to augment consumer protection, predominantly in digital markets.
The DMCC Bill as currently drafted is designed to enhance consumer protection by providing UK customers with increased rights in the face of unfair commercial practices, such as fake online reviews and subscription traps. The bill will also provide the CMA with direct enforcement powers, including the ability to fine businesses up to £300,000, or if higher, 10% of a businesses’ annual turnover for breaching consumer laws.
The impact of the bill on consumer protection is such that consumer facing corporations may have an increased risk of being found in breach of consumer law and may be subject to substantial penalties. The bill will also dictate that certain commercial practices will be automatically considered unfair such as “falsely stating that a product will only be available for a limited time”.
The consumer elements of the bill are not expected to become law until autumn 2024 with an aim to come into force in Spring 2025. However, more notably for our purposes are certain proposed amendments to the DMCC bill.
Collective action on basis of consumer law
On 5 December 2023, during the second reading of the bill in the House of Lords, several peers urged for collective action to be brought on the basis of consumer law. As Lord Etherton stated:
Provision for collective proceedings—which, colloquially, are generally called class actions—is made in the Competition Act 1998, as amended by the Consumer Rights Act 2015. That provision, however, applies only to breaches of competition law. For these reasons, I would urge the Government to make provision in the Bill for a collective actions regime, borrowing, where appropriate, from that which applies already in the case of breaches of competition law.
The proposed amendment would see an expansion of the collective action regime in the CAT to include actions based on consumer protection law. This would extend the opt out procedure afforded to competition claims to claims based on consumer protection.
The proposal was previously tabled on 15 November 2023 by former Lord Chancellor the Rt Hon Sir Robert Buckland MP (with the support of a number of other Conservative MPs); however, the amendment was not added to the version that passed from the House of Commons to the House of Lords. We hope that further amendments to the bill may see these amendments reinserted.
Impact of the developments
Increased access to opt-out proceedings would indicate a significant expansion to the landscape of the UK’s class action regime.
If accepted, the proposed amendment would significantly bolster consumer rights and access to justice thereby incentivising consumer facing corporations to comply more closely with their obligations. Further, effective collective actions enhance market efficiency and preserve the Court’s finite resources as multiple proceedings are avoided.
Whilst criticism is levied against the class action landscape in the US as being punitive and unmeritorious, it is more apt to compare the UK market to the opt out procedures currently underway in European countries, such as Portugal, the Netherlands, Belgium, Slovenia and Norway, where procedures have meant greater and more expedient access to justice for consumers.
Where large numbers of consumers have had their consumer rights infringed, they are often left with limited recourse to action. The enhanced use of opt-out proceedings via representative actions, or in the form of further amendments to the DMCC bill, would significantly bolster consumer rights in the UK and enable greater access to justice.
Oliver specialises in international cases involving multinational corporations where environmental harm or human rights abuses have been alleged
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