The UK Government signaled that it might adopt opt-out class actions in the UK.  On March 15, 2012, the UK Government’s Department for Business, Innovation and Skills announced reforms to help business, consumers, and the economy.  The proposals recognize that vigorous enforcement of competition law is good for consumers as well as other businesses.

The proposals seek to increase growth by enabling consumers and businesses to seek redress for violations of competition law.   Among the features in the reforms is the introduction of an opt-out class action mechanism which, in Europe, is often called “collective redress” although it has the same conceptual meaning as “class action.”  The UK’s recognition of the benefits of the opt-out class action is a giant leap of progress for European consumers, small businesses, and medium-size businesses who bear the brunt of competition law violations.

The UK’s proposal contrasts with widespread concerns in Europe about the opt-out mechanism.  In the past several years, lobbyists and even Member State governments have said that opt-outs are foreign to European legal culture.  The Commission’s impact study accompanying the White Paper on private enforcement said that opt-outs should be rejected because they brought principal-agent problems and excessive compensation for lawyers.

However, it must be recognized that several Member States already feature the opt-out mechanism.  Portugal, the Netherlands, Denmark, and Norway all feature the opt-out mechanism in their unique systems of collective redress.  All of these nations make it difficult or impossible for private parties to use the opt-out mechanism to initiate and prosecute claims for damages.  The proposals in the UK could mark the first time that a European victim might actually be able to file an opt-out class action on behalf of herself and all other claimants (except for those who opt-out of the action) to obtain compensatory damages.

In the Netherlands, the opt-out mechanism is available only for settlement. It can be used as a shield by defendants seeking a global release from liability, but it cannot be used by plaintiffs.  In Denmark, only the Consumer Ombudsman can file and prosecute an opt-out class action because the authorities apparently do not trust private citizens and their lawyers to prosecute opt-out class actions.   The UK reforms take a step away from through this paternalistic approach by allowing private victims (or “claimants”) and their lawyers to prosecute opt-out class actions instead of relying upon public authorities to take action.

The Department for Business Innovation & Skills announced that a consultation in which private and public parties can express their views was opened on April 24, 2012 and closed on July 24, 2012.  More information is available at the Department’s website.  Over 100 responses were received by the Department of Business Innovation & Skills in the consultation.  A Government Response to the submissions is expected by the end of October 2012.  Read more at this link.

If the political will exists, then it might be possible to introduce legislation in the fall of 2012 that would permit opt-out class actions in England through an amendment to the Competition Act 1998 with supplementary CAT rules in support.

RJ Gaudet & Associates LLC stays up-to-date on developments in class actions in Europe and has the ability to file lawsuits in England with the assistance of Prof. Dr. Ingrid Detter de Frankopan, an English Barrister who is Of Counsel to the firm.

A conference hosted by the American Bar Association Section of International Law in cooperation with the Pan-European Organisation of Personal Injury Lawyers; Netherlands Bar Association; AIJA (International Association of Young Lawyers); Union Internationale des Avocats; and other entities will explore the latest developments in E.U. class actions.  One of the panels at the conference will specifically discuss the opt-out mechanism with experts from across the E.U.  Registration is already open and further information is available at this link.