UK employers’ body the Confederation of British Industry (CBI) said that it fears a “litigation culture” will be encouraged by government plans to make it easier for consumers and companies to launch group lawsuits against businesses alleged to be acting anti-competitively. The risk and cost implications for treasurers if a ‘class action culture’ does establish itself in the UK are clear.
The proposed changes would mean that a single umbrella lawsuit could be launched automatically to gain compensation for those affected by competition scandals, such as price-fixing by airlines or big retail chains.
The government believes that many individuals are deterred by the difficulties and costs involved in going to court to seek redress. Competition minister Jo Swinson said that individuals should be empowered to “take appropriate action” when companies abuse their position in the market and affected individuals would be able to opt out of an action fought on their behalf.
“Businesses who want to voluntarily offer compensation will be able to do so through collective settlement and will be protected from expensive and lengthy legal action,” she added.
However, according to the CBI the proposed new laws would “let the litigation genie out of the bottle” and could adversely affect UK economic growth. Katja Hall, the CBI’s chief policy director said it was a bad idea to “adopt US-style collective actions”.
“By grouping potential claimants together indiscriminately these ‘opt-out’ actions fail the growth test and will fuel a litigation culture in the UK,” she said. “It is absolutely right that victims of competition law breaches are properly and swiftly compensated but there are better ways to do this than resorting to litigation, like using alternative dispute resolution.”
However, the proposals were welcomed by Which?, the UK product testing and campaigning group also known as the Consumers’ Association. Which? Executive director, Richard Lloyd, said the new laws would “give consumers more power against unscrupulous businesses”.
“In the small number of cases where this will apply, collective legal action and settlements will automatically include everyone who has been affected so more people should get redress and sooner,” he added.
“The proposals will help to put consumers in the driving seat and will also act as a meaningful deterrent to dodgy or dishonest firms. This is good for consumers, responsible businesses and the wider economy.”
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