Back in 2012, when we at the Competition Appeal Tribunal urged the coalition government to introduce a procedure to enable opt-out collective proceedings to be pursued in the UK with stringent judicial oversight and careful gatekeeping, there was fierce resistance.
Industry lobbyists invoked nightmares of American-style litigation – ambulance-chasing lawyers, frivolous claims, businesses held hostage by funders.
As against that caricature was the undeniable fact that in the UK there was a significant lacuna in the procedural rules, the effect of which was to enable wrongdoers who caused financial loss, which in aggregate terms could be huge, to avoid having to compensate their multiple victims. This was due to the fact that the cost of litigating a competition claim individually is economically prohibitive when the claim is relatively very small at the level of the individual claimant.
The merits of the arguments in favour of filling this gap in the legal system won the day and the Consumer Rights Act 2015 was the result. The CAT became the sole UK court capable of hearing opt-out collective actions (albeit restricted to competition claims), with robust judicial oversight and safeguards built into every stage. A decade on, none of the predicted disasters have materialised. There has been no litigation explosion. The tribunal’s rigorous certification process filters out unmeritorious claims. The outstanding quality of its judgments is internationally recognised. Yet there are some clouds on the horizon in the form of the government’s current review of the opt-out collective redress procedure.
The review was prompted by the existential threat to the system resulting from the Supreme Court’s majority decision in PACCAR. Opt-out redress is entirely dependent on third-party litigation funding being available to enable a class representative to pursue a collective claim on behalf of many consumers and small businesses with modest individual losses. Unfortunately, the Supreme Court’s decision outlawed the normal damages-based remuneration for funders (i.e. a fixed percentage of the amount recovered in the claim).
Funding uncertainty
Despite the adoption of alternative formulae for remuneration, the change has created uncertainty about funding and there are indications that meritorious claims are now finding it more challenging to win financial backing. A very recent report from Stephenson Harwood, which acts for defendants and claimants in such matters, reveals that case filings of collective proceedings in the CAT have significantly reduced in 2025. The replacement remuneration formula most commonly used since PACCAR has been based on a multiple of the funder’s outlay, with the multiple increasing along with the duration of the proceedings.
This formula is unsatisfactory, not least because it divorces the interests of the claimant class from those of the funder, and it has led to satellite litigation generated by defendants challenging this alternative basis. Such procedural challenges have also extended to other preliminary matters. This, together with many appeals of CAT rulings, has prolonged proceedings and increased costs. The previous government took legislative steps to reverse the PACCAR decision, but their completion was halted by the general election. The present government has instead initiated the current review.
The present unsatisfactory funding situation is of legitimate concern to those who value competitive markets and the pursuit of justice for consumers. However, some lobby groups have cited the costs and delays caused by these funding difficulties and resultant procedural wrangling as evidence that the mechanism which parliament created to protect consumers should be curtailed.
This would be a wholly regressive step. For those cases where individual claims are small, the effect would be to relieve large corporations of any liability to compensate consumers for the loss caused by their breach of the competition rules. The effective enforcement of those rules would also be diminished by removal of the deterrent effect of such claims.
There is much to be said for a general review of the system, which has been in place for a decade. The concerns relating to the complexity, cost, duration and funding of collective proceedings merit attention. Class actions are indeed complex, lengthy and expensive. But care should be taken not wrongly to attribute those characteristics to inefficiencies in the regime. In large measure, they reflect the robust safeguards built into the system, together with the inherent complexity of these claims, involving as they often do the interaction of formidable issues of law, fact and economics.
Unfavourable comparisons with the speed of resolution in other jurisdictions, for example, Canada, Australia and the US, are inappropriate as there is no clearly equivalent comparator system. The UK chose best practice from several, adopting the precautionary principle designed to exclude frivolous cases and to ensure fairness to both sides.
Further, many CAT cases are “standalone”, i.e. without the great benefit of a prior finding of infringement by a competition authority such as the CMA, which removes the burden on claimants of establishing liability. In this country, there is a paucity of such regulatory infringement decisions, which considerably increases the complexity, duration and costs. This is not necessarily the position in other jurisdictions.
That said, it would be surprising if, at this relatively early stage of its existence, our UK opt-out class action procedure did not still have issues to resolve. There is always scope for further improvement and refinement.
The most urgent need is the legislative reversal of PACCAR – without reasonable certainty of appropriate funding arrangements, the regime simply cannot function. The economic benefits of getting this right are substantial. The Stephenson Harwood report estimates that once functioning effectively and fulfilling its original policy intent, the regime could deter between £12bn and £24bn annually in anti-competitive conduct. It is therefore very much to be hoped that, following the review, the government will restore the ability to remunerate third-party funders of opt-out class actions by a percentage of the amount recovered.
Competition law restriction
Stephenson Harwood’s report also highlights a manifest anomaly: the current confinement of opt-out collective proceedings to competition law claims. This artificial restriction generates further wasteful satellite litigation by creating costly and unnecessary jurisdictional disputes. Those who have lost relatively small sums by reason of unlawful conduct in financial services, data protection or consumer rights labour under an equivalent injustice to those who are victims of anti-competitive behaviour.
There is no logic or fairness in providing one group but not the other with an effective remedy. Both face identical barriers to obtaining individual redress: viz losses too small to justify litigation, whereas aggregate harm to the class may run to hundreds of millions of pounds. Many other similar jurisdictions impose no such restriction. Our own opt-out system should become general in scope, thereby removing the present anomaly.
Finally, there is a serious concern on the part of many of those interested in the future of effective competition enforcement in the UK, including consumer organisations, that the present government consultation has been provoked by reports and newspaper articles expressing alarmist, inaccurate and misleading assertions as to the economic impact of class actions in the UK.
In a very detailed response to the consultation, the Class Representatives Network exposes the fallacies and irrelevances of the figures upon which such estimates of the alleged economic impact are based. It is very important that the government should be fully aware of the exaggerated and unreliable nature of this material, and should not be persuaded by it to make the profound mistake of undermining the UK’s fledgling opt-out system, which provides a crucial means of calling to account big businesses which injure consumers by anti-competitive practices.
Sir Gerald Barling was president of the Competition Appeal Tribunal (2007-2013). He is currently a door tenant at Brick Court Chambers. He serves on the advisory groups in several collective actions.
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