Opt-out collective actions (i.e. US-style class actions) can only be brought in the UK as competition law claims. Periodic proposals to legislate to expand this regime to consumer law claims have so far faltered. However, this is now back on the Parliamentary agenda. Several members of the House of Lords have indicated their support for expanding the regime to allow consumers and small businesses to bring opt-out collective actions for breaches of consumer law, and potentially on other bases.
If implemented, this expansion would be very significant and would allow for many new types of class actions in the UK. Tech companies are already prime targets as defendants to competition-related opt-out class actions. An expansion of the regime to allow actions for breaches of consumer law, as well as competition law, would only increase their exposure further.
As there is now limited time for legislation to be passed to effect such changes before the UK Parliament is dissolved in advance of an upcoming general election, this may be an issue for the next Parliament. It will therefore be important to assess what the UK’s main parties say on this – and any manifesto commitments – in the run-up to the election.
Background: Previous Attempt to Expand UK Opt-Out Class Actions Regime to Allow Non-Competition Claims
On 15 November 2023, an amendment to the Digital Markets, Competition and Consumers Bill (the “DMCC Bill”) (discussed in a prior Covington blog post here) was tabled in the House of Commons, to allow opt-out collective actions for consumer law claims. The amendment was supported by a number of MPs, but not by the UK Government, and it was ultimately rejected.
Development: Renewed Support for Expanding the Regime
The DMCC Bill is now being considered in the House of Lords (which scrutinises and recommends amendments to legislation proposed by the House of Commons). During a debate on 5 December 2023, several lords supported the idea of an extension to allow consumers and small businesses to bring opt-out actions for consumer law breaches. Some lords went further, suggesting opt-out actions should be allowed in other circumstances (e.g. for data abuse claims).
Significance of Expanding the Regime
Expanding the regime in the manner considered in the House of Lords debate would allow many new types of claim, and the potential defendants to such claims would also expand significantly. Under the present regime, we have seen class representatives trying to stretch the boundaries of what is truly competition law, arguing that the alleged offending conduct (which is often in substance a breach of: consumer law, environmental law, or data protection law) amounts to a competition law breach on the basis it represents an abuse by the defendant of a dominant position. However, if the opt-out regime is expanded, potential class representatives will not be limited to bringing competition claims, meaning that claims could potentially be brought more easily against a wider range of consumer-facing businesses.
The bill will be discussed in the committee stage of the House of Lords’ review, beginning on 22 January 2024. Amendments expanding the scope of the regime could then be included in the version of the DMCC Bill sent back to the House of Commons later this year for final consideration.
The House of Commons may reject such amendments (as it did previously) and send a further revised version back to the House of Lords (and drafts can move back and forth in this way until there is agreement). It is also quite possible that the DMCC Bill (whether or not any amendments are accepted) will not be passed before Parliament is dissolved in advance of the UK’s next General Election (expected in the second half of 2024).
One other area to look out for is what the amended version of the DMCC Bill says regarding litigation funding agreements (“LFAs”) (which are used by third party litigation funders that fund collective actions). The current version of the bill already includes a Government amendment designed to remove some of the difficulties faced by litigation funders in using LFAs to fund opt-out collective actions (following a Supreme Court decision in PACCAR, discussed in a prior Covington blog post here, and alert here). However, a member of the House of Lords has indicated an intention to table an amendment to cover LFAs used in opt-in collective actions also. The Government’s initial response to this has been to say that the DMCC Bill “is not the appropriate vehicle to deliver this aim” but it is “actively considering options for a wider response.”
Covington is monitoring these issues closely. If you have any questions on this topic, or collective actions in the UK more generally, please do get in touch with a member of the Covington team.