Collective actions could benefit the UK by up to £24bn a year by deterring anti-competitive business practices, though the current regime faces significant challenges that threaten its effectiveness, according to a report by Stephenson Harwood.
The report noted that the Competition Appeal Tribunal (CAT), which was extended in 2015 to include opt-out collective actions, was designed to enhance competition, ensure fair prices, prevent business abuses and encourage innovation.
However, data from litigation analytics platform Solomonic shows a dramatic decline in the number of collective proceedings filings from a high of 17 cases in 2023 to just three cases in the first nine months of this year.
Cases are also experiencing years of delays due to procedural complexities, strategic litigation by defendants and the 2023 PACCAR Supreme Court ruling, which undermined the enforceability of litigation funding agreements (LFAs) by determining that they should be treated as damages-based agreements.
Stephenson Harwood, which represents both defendants and claimants in collective actions, argues that if the CAT can be nurtured to work more effectively, it could prevent between £12.1bn and £24.2bn of harm to consumers and small businesses each year.
Genevieve Quierin, a partner at Stephenson Harwood, commented: “The regime stands at a critical juncture, facing challenges that undermine its ability to operate effectively.”
She added: “We need to nurture the system by expanding the regime beyond competition-only claims, stronger case management, improved consumer engagement and a legislative reversal of the uncertainty permeating the system.”
The report makes several recommendations to strengthen the regime, including investment in institutional capacity and resources and improving consumer distribution and take-up.
This picks up on criticisms made of the recent low distributions of funds following settlements, leading to substantial sums being redirected to access to justice charities.
The report argues that class identification should begin much earlier in the process and run in parallel with substantive litigation to build a more engaged class when distribution commences.
Front-loading approval of funding arrangements to the certification stage would benefit all parties, from class representatives to defendants and funders, the report maintains. It also urges proper support for class representatives, including improved early case management, cost budgeting and stricter timetabling.
The report calls on the UK government to implement the Civil Justice Council’s recommendation to reverse the effects of the PACCAR ruling, and says the opt-out regime should be expanded beyond competition cases to include data breaches, consumer protection and providing access to justice.
In the report’s foreword, former CAT president Sir Gerald Barling says the government should “not be tempted to go down a path, which would be a significantly regressive step, of curtailing or removing the only means by which multiple claimants – each suffering relatively small amounts of financial loss – can achieve justice”.
Stephenson Harwood is the latest firm to release a report on this topic, with Faegre Drinker publishing its own report last week, arguing that the regime is failing both businesses and consumers.
Based on Ipsos polling of 2,000 adults and interviews with 23 major corporates in the UK, the Faegre Drinker report revealed that 69% of respondents were unaware they were included in opt-out claims without giving consent, and two-thirds believed that permission should be necessary.
Earlier this year, CMS published a report highlighting the costs to businesses from the growth in collective actions, adding fuel to an ongoing debate among lawyers over their merit.
Hausfeld co-chair Anthony Maton wrote a vigorous defence of the status quo in an article for GLP, which prompted an equally steadfast response from the European Centre for International Political Economy (EPICE).
Separately, law firms, litigation funders and professional associations have submitted their responses to the UK government’s review into the opt-out collective actions regime, being led by the Department for Business and Trade, which closed last week.
Ahead of the review, representatives from 20 leading firms, including Mishcon de Reya, Stewarts, Freeths and Scott+Scott UK, along with the Collective Redress Lawyers Association (CORLA) and many others, called on the government to introduce urgent legislation to reverse the PACCAR judgment.
Martyn Day, co-president of CORLA, said: “This issue has created a great deal of uncertainty that is blocking access to justice for ordinary people taking on powerful corporations accused of wrongdoing.”
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