Case not made for new opt-out consumer class action regime

The Law Commission of England and Wales is, at the request of the UK government, currently examining whether a new consumer class actions regime could strengthen the way consumer laws are currently enforced. In April, it published an initial scoping questionnaire to gather the upfront views of stakeholders on a potential new opt-out regime.

Pinsent Masons has now submitted its response to that questionnaire, ahead of the 30 October deadline. In its response, it questioned whether a new consumer class actions regime in England and Wales would address a genuine unmet need, truly enable access to justice, and deliver benefits to consumers.

“While the pursuit of damages through civil litigation can, in some circumstances, be an appropriate way to seek redress, litigation can be expensive and protracted,” Pinsent Masons said in its submission. “Far from enabling access to justice, prioritising litigation over more appropriate mechanisms of redress could result in an explosion of speculative consumer law claims being brought for-profit with little to no benefits for those represented. This approach provides little in the way of justice, but large rewards for funders and lawyers.”

In the UK currently, unlike with competition law-related claims, there is no dedicated mechanism for pursuing mass consumer claims. There is, though, scope in principle for consumer law-related representative actions to be raised if the person seeking to act as a representative of others can demonstrate that everyone in the group has the “same interest” in the claim.

In its submission, Pinsent Masons said it would be premature to consider the creation of any new opt-out collective proceeding regime for consumer law. This is because material changes to the way consumer law can be enforced in the UK only took effect last year and because the UK government is still to determine what lessons should be learned from the way the competition law out-opt collective proceedings regime currently operates – a consultation on the latter is ongoing.

Pinsent Masons also cited a raft of recent cases that call into question who truly benefits from collective litigation.

“Even where opt-out claims are pursued successfully, experience so far suggests that damages will be accessed by only a small number, and these damages are dwarfed by the returns for funders and lawyers,” Pinsent Masons said. “Care should therefore be taken to avoid conflating ‘access to justice’ with ‘access to litigation’. Although considerable efforts have been made by some to characterise opt-out proceedings as providing effective access to justice, such efforts belie the reality of many of those claims.” 

For businesses, defending “speculative” opt-out claims that “have provided little to no benefit to those represented” can be “extremely time-consuming and expensive”, Pinsent Masons added. It highlighted industry concerns that this results in investment being diverted away from research and development and innovation and said it can end up “driving up prices and limiting choices in the long run”.

If a new consumer class action regime in England and Wales is to be taken forward, “various guardrails” should be put in place, Pinsent Masons said, proposing stricter regulation of third-party litigation funding, “robust rules” for certifying claims, an early strike out mechanism for abusive claims, and costs controls.

For a copy of the full submission made by Pinsent Masons in response to the Law Commission questionnaire, please contact Emily Cox.