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Consumer Class Actions – Opt In or Opt Out and Consumer Class Actions

The Consumer Rights Act 2015 makes it far easier for people including consumers and businesses to pursue claims on a collective basis arising out of an alleged infringement of Competition Law and more specifically against firms that have fixed prices or operate on a cartel basis. Such claims can now be brought on a collective basis by consumers or businesses on what is known as an “Opt Out” arrangement.

Opt Out claims can be brought by any person who suffered loss or damage and this extends to both Consumers and Businesses and based on one of the following namely:-

  1. An alleged infringement of Competition Law referred to as “Stand Alone Cases” or
  2. A Competition Law Infringement decision of the Competition & Markets Authority (following an Appeal from the Competition & Markets Authority) or of the European Commission referred to as “follow on cases”.

 

Definition of “Opt Out” Class Actions

An Opt Out arrangement is one where a Class Action can be pursued on behalf of an entire Class of Claimants subject to the approval of the Competition Appeal Tribunal (CAT) and if ultimately successful then all members of the Class will automatically be entitled to compensation. To clarify therefore it is not necessary for the members of the Class pursuing such a Claim to “Opt In” i.e. to instruct separate lawyers to pursue a Claim on their behalf as Claimants under an Opt Out arrangement will automatically participate in a collective claim under the Opt Out regime. Unless they decide to Opt Out then they will automatically be entitled to compensation.

The new Opt Out regime gives strength in numbers although an Opt Out Claim cannot proceed unless certified by the CAT and in order to be so certified it must satisfy the CAT that the proposed claim is suitable for an Opt Out Claim and that it is sufficiently meritorious and viable. If a collective claim under the Opt Out regime is so certified then it is arguable that there will be a far greater chance of successfully pursuing a Class Action and securing the necessary funding.

Advantages and Disadvantages under an Opt In arrangement as against an Opt Out arrangement

Under an Opt In arrangement it is not necessary to obtain a certificate from the CAT which in effect can be a mini trial on the merits of the proposed case. Claimants on an Opt In basis will be entitled to pursue their claims subject to the merits thereof and also subject to obtaining all necessary funding and in particular in many cases funding from a litigation funder.

Under an Opt In arrangement there could be large numbers of disgruntled people or businesses who did not join in the Class Action i.e. Opt In and therefore they will not automatically be entitled to benefit from a successful outcome as opposed to claimants in an Opt Out arrangement who will automatically be entitled to benefit from a successful Court Action.

Consumer claims on behalf of large numbers of claimants and which are sufficiently meritorious are more appropriate to the Opt Out regime subject of course to the initial CAT certification process as already described.

Some current Litigation

Not every proposed Opt Out Class Action Claim is successful. For instance a potentially huge claim against Mastercard on behalf of UK Consumers was blocked by the CAT last year when it ruled that it would not grant the necessary certification for the proposed proceedings to continue. This clearly illustrates the major initial hurdle which has to be jumped in terms of obtaining this necessary certification before an Opt Out claim can move forward.

There are currently various Class Action Law Suits in the United States against Volkswagen in relation to tests carried out on diesel cars and time will tell as to whether there will be successful claims in the United Kingdom. There is currently a preliminary hearing arranged to take place over coming months in the High Court seeking a Group Litigation Order under an Opt In arrangement and it is understood that there are currently tens of thousands of proposed claimants in law suits being conducted by two separate Law Firms.

If you are considering the possibility of pursuing with others a Class Action be it in relation to an investment made by you or by virtue of a potential consumer claim then our firm shall be pleased to assist you with any initial questions and the relevant contact is Leon Kaye at Leon Kaye Solicitors of 591-593 King’s Road Fulham London SW6 2EH. Tel 020 7228 2020.