Government moots US-style opt-out system for collective claims

The Government has launched a consultation on collective redress in competition cases, giving businesses three months to react to proposals that could introduce the UK’s first opt-out system.

Richard Pike
Richard Pike

If the framework is adopted, collective claims in the High Court will mirror class actions in the US, where claims can be pursued on behalf of a group of claimants unless individuals actively opt out.

One lawyer said an opt-out system had “been on the cards for a while” as a potential method of deterring competition infringement.

The reforms proposed are expected to increase both the number of claims and the size of payouts.

Richard Pike, a disputes partner at Baker & McKenzie, said: “We’re concerned that, despite assurances to the contrary, the proposals are too favourable towards claimant lawyers. The scope exists for lawyers to do much better out of these proposals than the victims.”

According to a statement from business minister Norman Lamb the introduction of an opt-out regime will make it easier for consumers and businesses to collectively bring a case to obtain redress for shared losses.

“Small businesses and consumers will be better equipped to represent their own interests, stop anti-competitive behaviour and seek redress if they have suffered loss,” he said.

However, Skadden partner John Beisner, a US class actions lawyer, warned that an opt-out system could involve thousands of people in a claim that they have no interest in.

“In the US, collective litigation hasn’t been a successful vehicle for dealing with consumer issues because individual elements need to be addressed – the consequence of the opt-out system is that it allows attorneys to make claims based on thousands of people who might have no interest in the issues,” he said.

Herbert Smith competition partner Kim Dietzel added: “It boils down to what’s certified as a ‘class’ so you don’t get law firms whipping up business – we don’t want to create a whole industry of law firms ambulance chasing unmeritorious cases.”

Others disagree. Hausfeld competition partner Anthony Maton told The Lawyer: “There’s limited private enforcement at the moment, and an opt-out system would change this. A collective action means you can bring a claim on behalf of the entire market – a much more effective remedy against cartels.”

The specific proposals in the Government’s consultation, which was launched today, are as follows:

  • Allowing the Competition Appeal Tribunal to hear more kinds of competition cases.  
  • Introducing an opt-out collective actions regime for competition law.
  • Promoting alternative dispute resolution to ensure that the courts are the option of last resort.
  • Ensuring private actions complement the public enforcement regime.