Opt-out class action proposed for competition claims

On Tuesday (24 April) the government published its anticipated consultation on competition law private actions, including radical proposals for a new "opt-out" collective action for competition claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT).

Under an opt-out regime claims can be brought on behalf of a defined group, without the need to identify individual group members; all those who fall within the group will be bound by the result unless they actively opt out of the case. This is a significant departure from existing procedures for multi-party litigation in England and Wales, which generally require potential claimants to make a positive decision to opt in to the proceedings. (The one exception, for representative actions under Civil Procedure Rule (CPR) 19.6, is not widely used due to the strict test that applies, as confirmed by the Court of Appeal in the Emerald Supplies case - see post.)

The consultation recognises concerns that an opt-out class action may encourage vexatious or unmeritorious claims, and the perceived "excesses" of the US class action model which is often alleged to encourage defendants to settle for large sums in order to avoid the cost of further litigation. The government believes these concerns can be addressed by various safeguards, including a thorough certification process, retention of the "loser pays" rule, and a continued prohibition on contingency fees in collective action cases. We therefore assume, though it is not stated expressly in the consultation, that such actions would be carved out from the proposals currently before Parliament to permit contingency fees, or "damages-based agreements", for civil litigation (see post on the introduction of legislation to implement the Jackson reforms).

The government has made it clear that it does not support a generic collective redress mechanism which would apply to all sectors. However, if these proposals are successfully implemented for competition law claims, it may make it more likely that similar initiatives will be brought forward for other sectors. Click here for more detail on the proposals from our competition litigation group.