UK OK: Class Actions Begin in Britain

Cast your mind back to March 2014: where were you? What were you doing? If you were reading this blog (as you should have been), you may have seen our post about the approval of class action lawsuits in Great Britain. Fast forward to this week. On October 1^st, the new rules come into effect and lawyers across the UK are already preparing for a wave of lawsuits to be filed.

Before the Consumer Rights Act 2015, which allows for collective actions to be brought if a company violates antitrust and/or anti-competition laws, U.S.-style collective actions were (literally) a foreign concept. Previously, European companies that violated antitrust law were liable for fines and, in extreme cases, criminal prosecution. Between these two extremes, however, consumers were under-served and unable to join together to seek damages as a single class, except in rare cases.

This, of course, is the point of class actions: when a large group of individuals is affected by a company’s actions, but their individual claims make it hard to justify the costs of a lawsuit, collective actions give those consumers the clout they need to take on a company. The Consumer Rights Act’s aim is to help people who are hurt (financially or in other ways) when a company breaks competition law (i.e. engages in price fixing or forms a cartel).

The law ushers in the use of “private actions” in the UK, allowing consumers to group together and file an “opt-out” lawsuit that covers everyone in the same situation unless they choose not to take part. The more consumers who group together, the more a company has to lose – especially as, in a break from its U.S. counterpart, UK private actions will follow the UK legal precedent of having the loser pay all legal costs, even in a collective action. What does that mean? Simple: If one thousand people win a collective action against Company X, Company X must pay the legal costs of one thousand plaintiffs in addition to whatever fines or judgements are dealt by the court. The Act is also designed specifically to allow SME (Small and Medium-sized Enterprises) to file alongside individuals when larger companies break the law.

The parts of the new Act that deal with collective actions have been looked at closely by the UK’s Competition Appeal Tribunal (CAT), a body which will see its powers boosted under the new system: all collective actions will now be scrutinized by CAT before being allowed to continue and, while CAT previously had the power to hear opt-in actions (a power that was only used once and generally thought to be ineffective), it will now hear opt-out actions across the UK – a move seen by many as an attempt to start standardizing law across the European Union. (As mentioned in last year’s blog post, both France and Italy have already adopted their own form of class actions.)

Despite these sweeping changes to private action law, the UK government is keen to emphasize that the Act is not simply a way of introducing class actions, telling the Financial Times that:

“The Consumer Rights Act is about getting a better deal for businesses and consumers.”

This is certainly true: the Act is one of the biggest changes to UK consumer law in thirty years, and it brings much-needed modernization to laws concerning faulty and returned goods and, perhaps most importantly, digital goods. (There are now, for the first time, laws protecting UK consumers who purchase digital media that fails to deliver the expected quality, for example.)

It’s important not to underestimate how revolutionary the introduction of collective actions may be to the UK legal landscape. By their nature, these lawsuits deal with large amounts of money – and, though they’re confined for now to issues stemming from antitrust and anti-competition violations, many see this new Act as turning point, paving the way for a much wider adaption of class action lawsuits in the future.

It remains to be seen how this will play out, and the differences between the UK’s new private actions and U.S. class actions may well mean they take diverging courses. There’s no room yet in the UK – and perhaps no public appetite – for defective product class actions that have become so common in the States, but it’s easy to imagine further changes coming in the next few years. A lot of it will depend on whether private actions are deemed a success – and for that, of course, we’ll just have to wait and see.