How Do Class Actions Help Consumers?

It’s fair to say that class action lawsuits have their share of detractors. Critics of these lawsuits, whereby a large group of people who have suffered similar injuries (usually monetary) band together against a company, have labeled them bad for businesses, claimed lawyers benefit more than consumers, and even suggested they be removed from U.S. law. In spite of this, though, class action lawsuits continue to be an effective and efficient way of helping individuals seek compensation when products (or services) don’t work as they should.

Class actions work – and it’s not too hard to see why.

Class actions empower individuals…

It might sound trite to talk of David versus Goliath when referring to individual consumers and powerful corporations, but it’s an apt description. The average citizen is ill-equipped to deal with the complexities of the U.S. legal system – especially against an army of corporate attorneys – and hiring a lawyer in cases where the value of their damages is relatively small is not exactly cost effective. Even if you’re seeking thousands in damages, hiring and retaining an attorney could cost you much more than that in legal fees and court costs. Thus, class action lawsuits were brought in to give individuals the clout they never could have had by themselves. One lawyer and one plaintiff seeking, say, $500 off Bad Company, Inc. is never going to end well. One lawyer and one thousand customers all seeking compensation for Bad Company’s defective or misleading product is a very different story.

…and make companies pay attention

A testament to class actions’ effectiveness is the increasing prevalence of arbitration agreements in company policies and terms of service. These agreements – the legality of which has been questioned but never successfully challenged – seek to ban consumers from filing class actions in the event of a disagreement. Arbitration agreements are often designed to limit consumers’ options, requiring a dispute be settled through the use of a third-party arbitrator, rather than in a court of law. The National Labor Relations Board has ruled against their use before, but the number of companies adding arbitration clauses in customer contracts continues to rise. Why? Simple: class action lawsuits, the very thing arbitration seeks to avoid, work – and they work overwhelmingly in consumers’ favor, calling companies out when their products are defective, when they fail to fulfill promises, or when they misled the public.

They don’t take up your time…

A lawsuit involves a lot of work, with most lasting several years. Even if individual consumers did have financial grounds to file their lawsuits separately, would each of them agree to the time commitment? Class actions allow “passive” plaintiffs to join in on settlements as long as they have valid claims. Thousands of individuals can receive compensation without having to spend time filing documents, going before a judge, or even, in most cases, leaving their homes. Settlement websites allow consumers to submit their information and receive their share of any settlement with minimum hassle and interruption to their lives.

…and they change the way companies work, forever

Much negative commentary about class action lawsuits focuses on the money – how much individuals receive, how much lawyers can charge, and even how much goes unclaimed once a settlement’s been reached. Financial compensation is only one aspect of most class action settlements, though. Let’s not forget that these lawsuits are filed in the first place because of a legitimate complaint about a product or service. Has something been defectively designed? Have customers been ripped off? Class action lawsuits target, first and foremost, companies’ bad practices, and seek to put an end to these practices by forcing companies to make changes.

Many problems of the past have been addressed specifically because class action lawsuits called companies out and required them to, say, label their products more accurately, or change wording so it’s not misleading. Knowing that you can trust companies’ use of “natural” food labeling is due, in part, to the ongoing work of class action lawsuits filed against companies that misuse the term. Equally, questions about online privacy, and how companies like Facebook are able to share your information, have formed the heart of several class action lawsuits over the last few years, as consumers band together and fight to protect future generations.

All systems have their flaws, and honest appraisals of class action lawsuits are necessary to ensure they stay relevant and helpful to those they’re meant to serve – people like you. Class actions are an important part of the American legal system and it’s no surprise that their use is finally spreading to countries around the world.